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                           TELEPHONE

Date of Introduction: 01.07.1994 vide Notification No.1/94-ST
                     dt.20.06.1994.

Definition:
      “Telegraph authority” has the meaning assigned to it in Clause
(6) of section 3 of the Indian Telegraph Act 1885 and includes a
person who has been granted a licence under the first proviso to sub
section (1) of Section 4 of that Act.
                     (Section 65(74) of Finance Act, 1994 as amended)
      As per Section 3(6) of Indian Telegraph Act, 1885, “ Telegraph
Authority” means the director General of Posts and Telegraphs and
including any officer empowered by him to perform all or any of
the functions of the Telegraph authority under this Act.
      Section 4 (1) of Indian Telegraph Act, 1885 reads as under:
      “Within India the Central Government shall have the
exclusive privilege of establishing, maintaining and working
Telegraphs:
      Provided that the Central Government may grant a licence on
such conditions and in consideration of such payment as it thinks
fit to any person to establish, maintain or work a telegraph within
any part of India:
      Provided further that Central Government may, by rules
made under this Act and published in Official Gazette, permit,
subject to such restrictions and condition as it thinks fit the
establishment, maintenance and working-
      (a)      of wireless telegraphs on ships within Indian
               territorial water and on aircraft within or above India,
               or Indian territorial water, and
      (b)      of telegraphs other than wireless telegraphs within
               any part of India.”

Taxable events and scope of service:
                                                                    2


       Taxable service means any service provided to the subscriber
by the telegraph authority in relation to a telephone connection.
                 (Section 65 (72) (b) of Finance Act 1994 as amended)
       “Subscriber” means a person to whom any service of a
telephone connection or a facsimile or a leased circuit or a pager or
a telegraph or a telex has been provided by the telegraph authority;
                     (Section 65 (71) of Finance Act 1994 as amended)
       In the case of plastic roaming facility, the home operator
(home network), i.e., where the subscriber belongs to and who
arranges roaming facility in other metro cities through the
arrangements with the service operators (visiting network) should
collect and pay the service tax.
                       (Ministry’s F.No.149/1/97-CX4, dt.03.09.1997)
       In the case of International roaming the foreign visited
network operator forwards the usage bills to the Home network
operator pertaining to the subscribers of Home Network operator
who have made usage of visited network. On receipt of the usage
bill from the foreign network operator the Home network operator
includes the said amount and roaming surcharge in the regular
monthly bill of the subscriber. As the value of taxable service
under section 67 (b) of the Finance act, 1994 as amended is the gross
total amount charged by the telegraph authority (here Home
Network operator) from the subscribers, the Board is of the view
that the service tax shall be chargeable on the comprehensive (gross)
bill raised by Home Network operator on its subscribers inclusive
of foreign usage bill and roaming surcharge.
                       (Ministry’s F.No.149/6/97-CX-4 dt.04.06.1999)
       For the difference between the amount of service tax to be
collected (based on billed amount) and service tax actually collected,
the department may not insist at this stage for reconciliation of the
figures of such service tax billed and collected and may place
reliance on the financial control system of Telecom Department for
the reconciliation of the telephone bills which would automatically
mean reconciliation of service tax.
                   (Ministry’s F.No.149/5/95-CX-4 dated 15.10.1996)
                                                                   3


      The first date on which the Secondary Switching Areas make
the book transfer to the DOT would be taken as the date of
crediting to the Central Govt. for the purpose of assessment and
calculation of interest.
                   (Ministry’s F.No.149/5/95-CX-4 dated 15.10.1996)


Value of the Taxable Service:

       The value of taxable service shall be the gross amount charged
by the telegraph authority and includes the adjustments made by
the telegraph authority from any deposits made by the subscriber at
time of application for telephone connection but excludes initial
deposit made by the subscriber at the time of application for
telephone connection.
                        (Section 67 of Finance Act, 1994 as amended)
      The amount received by the cellular telephone Company
from subscribers towards SIM Card would form part of the taxable
value for levy of Service Tax. As the SIM Card, unlike the
telephone instrument cannot be purchased by the customer from
elsewhere, the charges towards the Sim Card can essentially be
viewed as processing charges for activating the cellular phone. The
taxable amount should, therefore necessarily include the value of
the Sim Card.
      In cases where the telegraph authority has extended services at
a discounted price, the Service Tax liability is limited to the
discounted price so charged.
               (Ministry’s Circular No.23/3/97 -ST dated 13.10.1997)

Exemption and Exclusion:

1.   The telephone services provided to the following are
     exempted from payment of Service Tax
     -U.N. or an International Organization.
     -Specified diplomatic mission or its Members.
                                                                  4


     -Departmentally run public telephones for local calls.
     -Guaranteed public telephone only for local calls.
     -Free telephone at Airports and Hospitals where no bills are
     being issued. –
      (Authority:- Notfn.3/94-ST dt. 30.06.1994, 5/96-ST dt.
      03.04.1996 and 48/98-ST dt.24.04.1998)
2.   The Public Mobile Radio Trunking Services (PMRTS) are not
     covered within the scope of taxable services provided in
     relation to “telephone connection”.
               (Ministry’s F.No.341/16/2000-TRU dated 10.08.2000)
3.   Cellular phone operators are realizing rent and access charges
     from their subscribers and as such when cellular companies
     pay service tax on the amounts received by them from their
     subscribers it includes rent and access charges and as such to
     charge again service tax on their charges by DOT will amount
     to double taxation. Board is of the view that no service tax is
     again chargeable on rent and access charges paid to DOT by
     cellular phone operators.
4.   Service provided free and no amount is received by the
     telegraph authority in that case the question of service tax
     liability dose not arise.
                  (Ministry’s Circular No.23/3/97-ST dt. 13.10.1997)

5.   Interest earned on refundable deposits has got no nexus with
     the value of taxable service. Therefore, the Service Tax would
     not be leviable on interest earned of refundable deposits.

6.   As per the provisions of section 65(72) (b) of Chapter V of the
     Finance Act, 1994, service tax is leviable on the service
     provided by the Telegraph authority to a subscriber, in
     relation to a telephone connection. Further, under section 67
     (b) of the said Finance Act, the value of taxable service has
     been defined to include only the amount charged for the
     services provided by Telegraphic Authority to a subscriber.
     On a harmonious interpretation of the above provisions and
                                                                    5


     also taking note of the fact that the amount of surcharge on
     delayed payment of a telephone bill does not alter the value of
     taxable services, it is hereby clarified that service tax is not
     leviable on the amount of surcharge collected for delayed
     payment of telephone bills. Consequently, Board’s Service
     Tax circular No.29/3/99, dt.15.07.1999 (issued from
     F.No.149/5/97-CX.4), which is contrary to the above
     position, stands withdrawn.
                    (Ministry’s F.No.341/1/2000-TRU dt.20.12.2000)
  7. The licence fee charged by the Central Government from
     licence holders is not covered as it is not recovered from
     subscribers and it is not service charges. However, if the
     service provider recovers the licence fees from the subscriber,
     service tax will be attracted, since the value of the taxable
     service is the gross amount recovered from the subscriber.

                   GENERAL INSURANCE

Date of Introduction: 01.07.1994 vide Notification No.1/94 -ST
                     dt. 20.06.1994.

Definition:
      “Insurer” means any person carrying on General Insurance
Business in India. (Section 65(33) of Finance Act, 1994 as amended)
      “General Insurance Business” has the meaning assigned to it in
Clause (g) of Section 3 of the General Insurance Business
(nationalization) Act, 1972.      The said clause (g) provides that
“general insurance business” means fire, marine or miscellaneous
insurance business, whether carried on singly or in combination
with one or more of them.         (Section 65(27) of Finance Act,
1994 as amended)

Taxable events and scope of service:
                                                                    6


     Taxable service means any service provided to a policyholder,
by an insurer carrying on general insurance business.
                 (Section 65(72)(d) of Finance Act, 1994 as amended)

Value of Taxable Service:

       In the case of Insurance, the value of taxable service shall be
the gross amount of the premium charged by the service provider
viz., insurer from the policyholders.
                     (Section 65(67) of Finance Act, 1994 as amended)
       The General Insurance business is carried on mainly by five
public sector Insurance Corporations, viz., GIC, NIAC, NIC, OIC
& UIC. Though the service tax is collected by the brokers along
with the premium yet registration and payment obligations are
complied by the Head office of each corporation. Each corporation
will furnish a list of their Divisions and Branch offices along with
the accounts maintained by them.              As Private Insurance
Corporations are being licensed now Commissioners may device
suitable procedure in this regard in consultation with the
Companies.


Exemptions & Exclusions:

i.   Following activities under insurance are exempt from the levy
     of Service Tax.
     (b) General insurance service provided to U.N or
         International organizations.
     (c) Services provided to policyholder of Jan Arogya Bima
         policy in relation to General Insurance business.
     (d) General insurance business for non life insurance premium
         to specified Diplomatic mission.
     (e) Personal Accident social security and Hut Insurance
         Scheme.
     (f) Comprehensive crop Insurance Scheme.
                                                                   7


     (g) Cattle Insurance under Integrated Rural Development
         Programme.
     (h) Janata Personal Accident Policy and Gramin Accident
         Policy.
     (i) Group Personal Accident Policy for self-employed women.
     (j) Agricultural Pumpset and failed well Insurance.
     (k) Premia collected on insurance of Export of goods from
         India and Export Credit Insurance.
     (l) Premium received from Re-insurance both domestic and
         overseas.
     (m) All business for which premium is booked outside India.
     (n) Small transactions involving premium of less than rupees
         fifty except Motor insurance.
     (o) Group personal accident scheme in relation to General
         Insurance Business for the employees of Government of
         Rajasthan.
     (Authority: - Notification No. 3/94-ST dt. 30.06.1994, No.
     10/96 dt.26.11.1996, 12/97-ST dt. 14.02.1997, 48/98-ST
     dt.24.04.1998 & 1/2000-ST dt.09.02.2000)
ii.  The Central Government vide Notification No. 3/2000-ST,
     dt. 06.07.2000 has exempted premium paid for general
     insurance business in relation to National Agricultural
     Insurance Scheme or Pilot Scheme. This exemption from the
     whole of taxable services leviable under Section 66 of the Act.
     The term National Agricultural Insurance scheme is also
     called Rashtriya Krishi Bima Yojana.
iii. The Central Govt. has exempted vide Notification No.
     4/2000-ST, dt. 31.07.2000 from the whole of taxable services
     levied in relation to general insurance provided under the
     Central Sector Scheme on Cattle Insurance. This exemption is
     meant for social upliftment in relation to cattle breeding.
 iv.    Service provided in relation to Life Insurance is not covered
     by Statute and hence not leviable to Service Tax.
v.   The service tax on general insurance business was made, w.e.f.,
     01.07.1994. So policies issued prior to 01.07.1994 even though
                                                                  8


      the premiums were paid earlier but policies continue to be
      effective subsequently and also in cases where premiums are
      being paid after 01.07.1997 are not covered by the levy. In
      both the above situations, the risks continues to be covered
      after 01.07.1997 (Refer F.No.150/1197-CX.4 dt. 02.03.1997)
vi.   When the amount of risks covered is very large, the lead
      insurer shares the risk with other co -insurers. The lead
      company receives the entire amount along with the co-
      insurers. Since premium is received from policyholders by the
      lead company, service tax is payable by that company.
      (Ref. F. No. 150/1194-CX.4 dt.02.03.1996)




                        STOCK BROKER

Date of Introduction: 01.07.1994. Notification No.1/94-ST dt.
                      20.06.1994.
Definition:
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            “Stock Broker’ means a stock-broker who has either
made an application for registration or is registered as a stock-
broker in accordance with the rules and regulations made under the
Securities and Exchange Board of Indian Act, 1992 (15 of 1992).”
                    (Section 65(69) of Finance Act, 1994 as amended)
      The service provided by the stock broker becomes liable to
pay Service Tax subject to the conditions that the -
     (a) Stock Broker should be registered as per SEBI Act, 1972.
     (b) Stock should be listed in the Stock Exchange.
     (b) The Stock Exchange must be recognized Stock Exchange
         as per Securities Contract (Regulation) Act, 1956.
     (c) The Sale/Purchase should be on behalf of an investor.

Taxable event and scope of service :
      Taxable service means any service provided to an investor by a
stockbroker in connection with sale or purchase of securities listed
on a recognized Stock Exchange.
                 (Section 65(72)(a) of Finance Act, 1994 as amended)

      “Securities” has the meaning assigned to it in clause (h) of
section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of
1956).
                    (Section 65 (61) of Finance Act, 1994 as amended)

      Section 2 (h) of the Securities Contracts (Regulation) Act, 1956
(42 of 1956) reads as follows:
            “Securities” includes
      (i) shares, scrips, stocks, bonds, debentures, debenture
            stock, or other marketable securities of a like nature in
            or of any incorporated company or body corporate;
      (ia) derivative;
      (ib) units or any other instrument issued by any collective
      investment scheme to the investors in such schemes;
      (ii) Government securities;
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     (iia) such other instruments as may be declared by the
     Central Government to be securities; and
     (iii) rights or interests in securities.”

      “Recognized stock exchange” has the meaning assigned to it in
clause (f) of section 2 of the Securities Contracts (Regulation) Act,
1956 (42 of 1956).           (Section 65 (58) of Finance Act, 1994 as
amended)

      Section 2 (f) of the Securities Contracts (Regulation) Act, 1956
(42 of 1956) reads as follows:
      “Recognized stock exchange” means a stock exchange which is
for the time being recognized by the Central Government under
section 4.

     The Central Government has recognized the following 22
Stock Exchanges:
     (1) Bombay Stock Exchange
     (2) Delhi Stock Exchange Association Ltd.
     (3) Madhya Pradesh Stock Exchange (Indore)
     (4) Ahmedabad Stock Exchange
     (5) Madras Stock Exchange
     (6) Calcutta Stock Exchange
     (7) Uttar Pradesh Stock Exchange Association Ltd.
     (8) Pune Stock Exchange Ltd.
     (9) Bangalore Stock Exchange Ltd.
     (10) Ludhiana Stock Exchange Association Ltd.
     (11) Hyderabad Stock Exchange Ltd.
     (12) Gauhati Stock Exchange Ltd.
     (13) Cochin Stock Exchange Ltd.
     (14) Mangalore Stock Exchange Ltd.
     (15) Magadh Stock Exchange Association
     (16) Bhubaneshwar Stock Exchange
     (17) Saurashtra Kutch Stock Exchange
     (18) Jaipur Stock Exchange
                                                                    11


      (19) Vadodara Stock Exchange
      (20) Coimbatore Stock Exchange
      (21) Over The Counter Exchange of India
      (22) National Stock Exchange.
      Own trading: In case, a broker enters into a transaction on
his own account, with an investor who is a non–member on the
stock exchange, the service provided will be taxable service, and
subject to Service Tax.
      Arbitrage: In the case of arbitrage transaction i.e. the
transaction between two brokers of different stock exchanges, the
service is provided by a broker i.e. the member of a stock exchange
even though the investor may be a member of another stock
exchange, there being an investor involved in the transaction, the
service so provided to the investor will be a taxable service and
subject to Service Tax.
              (Ministry’s F.No.148/1/94 CX-4 (Pt. I) dt. 31.12.1996)
      National Stock Exchange using Very Small Aperture
Terminals (VSAT) installed at trading members office whereas the
members of local stock exchange is required to carry on business
compulsory within the jurisdiction of the said Stock Exchange
where he is registered. Board is of the view that Trading
members/Stockbrokers of National Stock Exchange will have to
register their premises with the Central Excise Commissionerate
having the jurisdiction over the place where trading membership is
granted and infrastructural facilities are provided for installing the
Very Small Aperture Terminals and operating the business.
            (Ministry’s F.No.148/5/96 -CX.4 dt.16.09.1996)

      A Broker who is registered with Kanpur Stock Exchange has
to apply for registration with Commissionerate of Central Excise,
Kanpur. All the officers of this broker irrespective of location will
be registered with Commissionerate of Central Excise, Kanpur.
                     (Ministry’s F.No.148/1/94-CX.4 dt.06.09.1994)
                                                                      12


      For the issue raised as to whether service tax can be collected
for a transaction in Sikkim Stock Exchange, which has not yet been
recognized, it is clarified that service tax is required to be collected
from Stockbrokers. Stockbroker has been defined in the Act itself,
i.e., a stockbroker who has either made an application for
registration or is registered as a stockbroker in accordance with the
rules and regulations made under the Securities and Exchange Board
of Indian Act, 1992 (15 of 1992). Hence, all stockbrokers are
covered by service tax scheme.
                       (Ministry’s F.No.148/1/94-CX.4 dt.06.09.1994)

     For the reasons of transparency that service tax
charged/collected is shown sep arately in the Contract Note/Bills.
                      (Ministry’s F.No.148/1/94-CX.4 dt.06.09.1994)
     Charging of service tax from an investor who is provided with
taxable service by two brokers of different stock exchanges does not
amount to double taxation.

Value of Taxable Service:
     Value of the taxable service provided by Stockbroker, is the
aggregate of the commission or brokerage charged by the
stockbroker on the sale or purchase of securities from the investors
and includes the commission or brokerage paid by the brok er to
any sub-brokers.
                       (Section 67 of Finance Act, 1994 as amended)
     “Sub-broker” means a sub-broker who has either made an
application for registration or is registered as a sub broker in
accordance with the rules and regulations made under the Securities
and Exchange Board of India Act, 1992.
                  (Section 65 (70) of Finance Act, 1994 as amended)

Exemption and Exclusion:
  1.  Jobbing - The transaction on principal to principal basis
      between brokers, no investor is involved and as such no
                                                                   13


        taxable service is provided and therefore, no Service Tax is
        chargeable.
               (Ministry’s F.No.148/1/94 CX-4 (Pt.I) dt.31.12.1996)
  2.    Taxable service means any service provided to an investor,
        by a stockbroker in connection with the sale or purchase of
        securities listed on a recognized stock exchange. The
        commission charged by stockbroker as underwriters is for
        floating securities. Hence, it is not covered.
                      (Ministry’s F.No.148/1/94 CX-4 dt.06.09.1994)
  3.    Sub-brokers are not covered by service tax.
                      (Ministry’s F.No.148/1/94-CX.4 dt.06 .09.1994)
  4.    The following transaction undertaken by the Stockbrokers
        do not attract the levy of Service Tax.
        a. Private placement charges
        b. Public issue consultancy fee
        c. Brokerage or primary market operations

Case laws:

U.S.Chaudhary V/s. CCE, Kanpur [1999 (110) ELT 925
(Tribunal)

No service tax is payable when the brokers of the same stock-
exchange or brokers of one stock exchange with another stock-
exchange carry on business in purchase or sale of securities since in
either of the situation no investor is involved.
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                       COURIER SERVICES

Date of Introduction: 01.1.1996 vide Notification No.6/96-ST
                     dt. 31.10.96.

Definition:
       Courier Agency means a commercial concern engaged in the
door to door tr ansportations of time sensitive documents, goods or
articles, utilising the services of a person either directly or indirectly
to carry or accompany such documents, goods or articles.
                      (Section 65(20) of Finance Act, 1994 as amended)

Taxable events & scope of services:
                                                                     15


      Taxable service means any service provided to a customer, by
a Courier Agency to their client in respect of door-to-door
transportation of time sensitive documents, goods or articles.
                 (Section 65(72)(f) of Finance Act, 1994 as amended)
       The nature of service provided by these Express Cargo
Transporter is the same as the service provided by the conventional
courier agencies. Therefore, these Express Cargo Services are also
liable to pay Service Tax.        (Ministry’s F.No.341/43/96-TRU
dt.31.10.1996)

      Angadia engaged in commercial activities such as undertaking
of delivery of the documents, goods, or articles received from the
customer to other end, are clearly covered by the definition of
“Courier Agency” and are liable to pay the Service Tax on the
services provided by them.


Value of Taxable service:

      Value of the taxable service in relation to Courier Service shall
be the gross amount charged by such agency from the customer for
services in relation to door-to-door transportation of time sensitive
documents, goods and articles.
                         (Section 67 of Finance Act, 1994 as amended)
      Wherever the Courier Agencies provide service in relation to
warehousing, packing, inventory management relatable to door to
door transportation of documents, goods and articles, the amount
charged for such facilities are includible in the gross amount for the
purpose of levy of Service Tax.          (Ministry’s F.No.341/43/96-
TRU dt.31.10.1996)

Exemption and Exclusion:
                                                                    16


i. The services provided by the Courier Agencies to United
     Nations, an International Organization and certain specified
     Diplomatic Missions are exempted from payment of Service Tax.
     (Authority: Notification no. 48/98 dated 24/04/98, 44/98 dated
     22/1/98, 47/98 ST dated 24/4/98)
ii. ‘Co-loader’ is a company whose services are engaged by a
     Courier Agency for handling part of the job for delivery of
     articles, goods, documents, etc. they are not providing any direct
     service to the customer. The client is concerned only with the
     Courier Agency, for the services and the co-loader is only a sub-
     contractor. Therefore the service provided by the “co-loader” is
     not leviable to Service Tax.
iii. Department of Post is not a commercial concern. The Speed Post
     services provided by it do not attract Service Tax.
                       (Ministry’s F.No.341/43/96-TRU dt.31.10.1996)
                                                                   17


                       PAGER SERVICES

Date of Introduction: 01.11.1996 vide Notification No.6/96-ST
                     dt.31.10.1996

Definition:
      A “Pager” means an instrument, apparatus or appliance, which
is a non-speech, one way personal calling system with alert and has
the capability of receiving, storing and displaying numeric or
alphanumeric messages.              (Section 65(29) of Finance Act,
1994 as amended)

Taxable Event & Scope of Service:

      The taxable service means any service provided to a
subscriber, by the telegraph authority in relation to a pager.
                 (Section 65(72)(c) of Finance Act, 1994 as amended)

Value of Taxable Service:

     The value of taxable services shall be the gross amount charged
by the service provider for such service rendered by him and
includes the adjustment made by the telegraph authority from any
deposit made by the subscriber at the time of application for pager
but does not include initial deposit made by the subscriber at the
time of application for pager.            (Section 67 of Finance Act,
1994 as amended)

Exemption and Exclusion:

  1. The pager services provided to U.N. or International
     Organization would not be chargeable for Service Tax.
            (Authority: - Notification no. 48/98-ST dt.24.04.1998).
                                                                     18




                    ADVERTISING AGENCY

Date of Introduction: 01.11.1996 vide Notification No.6/96-ST
                      dt. 31.10.1996.

Definition:
      Advertising agency means any commercial concern engaged in
providing any service connected with the making, preparation,
display or exhibition of advertisement and includes an advertising
consultant.
                     (Section 65(3) of Finance Act, 1994 as amended)

Taxable Event And Scope Of Service:

     Taxable Service means any service provided to a client by
advertising agency in relation to advertisement in any manner.
                 (Section 65(72)(e) of Finance Act, 1994 as amended)

Value of Taxable Service:

     The value of taxable services in relation to service provided by
an advertising agency to a client shall be the gross amount charged
by such agency for services rendered in relation to advertisements.
                         (Section 67 of Finance Act, 1994 as amended)
     The above value, includes the gross amount charged by the
agency from the client for making or preparing the advertisement
material, irrespective of the fact that the advertising agency directly
undertakes the making or preparation of advertisement or gets it
done through another person as well as the commission received by
the agency. However, the amount paid excluding their own
                                                                     19


commission by the advertising agency, for space and time in getting
the advertisements published in the print media (i.e. newspapers,
periodicals, etc.) or in its Broadcasting will not be includible in the
value of taxable service.
      The value includes the charges on account of travel,
transportation and hotel stay.
       If the market Survey / Research relates to the advertisement,
all expenses that are charged from the client on account of Market
Survey/Research relating to advertisement are includible in the
value of taxable service.
      The amount charged by foreign TV channels directly to their
clients in foreign currency is not includible as these amounts are not
charged by the Advertising Agency from the clients.
                      (Ministry’s F.No.341/43/96-TRU dt.31.10.1996)
      Service Tax would be payable on the gross amount charged by
the Advertising Agency from the Clients. The exclusion of cost of
paper and printing is not permissible, as it constitutes a component
of service provided.
       In cases where the advertisement is given by the client in the
newspaper through Advertising Agencies, the Service Tax would be
leviable on the agency charges of the Advertising Agency, not on
the total charges recovered from the clients.

Exemption & Exclusion:
i. The services provided by the Advertising Agencies to United
    Nations, an International Organization and certain specified
    Diplomatic Missions are exempted from payment of Service Tax.
    (Authority: Notification No. 48/98-ST dt.24.04.1998, 44/98-ST
    dt.22.01.1998, 47/98-ST dt.24.04.1998)
ii DAVP not being a commercial concern is not liable to pay
     Service Tax in respect of the services rendered by it to other
     Central Government Departments.
iii. Film/documentary produced by the Film Producer is not
     leviable to Service Tax provided that the advertising agency
     makes the payment of Service Tax on including the value of
                                                                    20


    Film/documentary. In case the film producer chooses to charge
    the client directly, in that case he has to pay Service Tax
    accordingly.
                     (Ministry’s F.No.341/43/96 TRU dt.31.10.1996)
iv. The Service rendered by local cable Television operators of mere
    display of Advertisements in the Television Channels Broadcast
    through Electronic media and charges collected from Customers
    in respect of the cost of space and time for such display would
    not be leviable to Service Tax.
                 (Ministry’s F.No.341/51/2000 TRU dtd.22 -11-2000)
v. Release of advertisement directly in the News Papers (not
    through advertising agency) by the clients, is not covered by
    Service Tax as service is being provided by the news paper and
    not the advertising agency.

Case Law:

      Hon’ble High Court of Gujarat in the case of Addition
Advertising Agency vs. U.O.I. [1998(98) E.I.T.14 (Guj)] held that
the subject of tax is not talking on Advertising service but on actual
rendering of service and the measure of tax as well as charging
provision of tax is based on the gross amount paid for service. It is
further held that the tax is not on Advertisement but is on the
services rendered with reference to the Advertisement and there is a
clear distinction between the Advertisement and Advertising
Services and upheld the levy of Service Tax on Advertising Agency.
                                                                  21




                  CUSTOM HOUSE AGENT

Date of Introduction:      15.06.1997 vide Notification No.17/97-
                    ST      dt.06.06.1997.

Definition:
      “Custom House Agent” means a person licensed, temporarily
or otherwise, under the regulations made under sub-section (2) of
section 146 of the Customs Act, 1962.
                    (Section 65(22) of Finance Act, 1994 as amended)
      A person is permitted to operate as a customs house agent,
temporarily under regulation 8(1) and permanently under
regulation 10, of the Customs House Agents Licensing Regulations,
1984.

Taxable events & Scope of service:
                                                                     22


      Taxable service means any provided to a client, by a Custom
House Agent in relation to the entry or departure of conveyances
or the import or export of goods.
                 (Section 65(72) (h) of Finance Act, 1994 as amended)
      The services rendered by the custom house agent are not
merely limited to the clearing of the import and export
consignment. The CHA also renders the service of
loading/unloading of import or export goods from/at the premises
of the exporter/importer, the packing, weighment, measurement of
the export goods, the transportation of the export goods to the
customs station or the import goods from the custom station to the
importers premises, carrying out of various statutory and other
formalities such as payment of expenses on account of octroi,
destuffing    /pelletisation    terminal     handling,      fumigation,
drawback/DEEC processing, survey /amendment fees, dock fees,
repairing and examination charges, landing and container charges,
statutory labour charges, testing fees, drug control formalities,
sorting /marking/stamping/sealing on behalf of the exporter/
importer. The custom house agent incur various other expenses
such as crane/fork lift charges, taxi charges, Photostat and fax
charges, bank collection charges, courier service charges, and
miscellaneous other expenses on account of the importer /exporter.
For all the above charges, the CHA is ordinarily reimbursed by the
importer/ exporter for whom the above services are rendered.
Apart from the above charges, the CHA also charges the client for
his services under the head /nomenclature of “agency and
attendance charges “ or similar kind of heads which is purported to
be his service charge in respect of the services rendered in relation
to the import/export goods.
      A CHA may have various branch officers located at different
stations but all these branch officers do not raise the bills and only
the main or central office will be raising the bills. In such cases only
the central office should be registered with the Deptt. The
Commissioners of Central Excise may verify any such contention
and allow the payment to be made by Head Office.
                                                                   23


                    (Ministry’s F.No.B43/1/97-TRU dt.06.06.1997)

Value of Taxable Service:

      Value of the taxable service shall be the gross amount charged
by the service provider for such service rendered by him.
                         (Section 67 of Finance Act,1994 as amended)
      The Service Tax is to be computed only on the gross service
charges, by whatever head/nomenclature billed by the Custom
House agent to the client. It is informed that the practice obtaining
is to show the charges for service as “agency commission”,
“charges”, “agency and attendance charges”, “agency charges” and
some similar descriptions. The Service Tax will be computed only
with reference to such charges. In other words, payments made by
CHA on behalf of the client, such as statutory levies (cess, custom
duties, port dues etc) and various other reimbursable expenses
incurred are not to be included for computing the Service Tax.
      In many cases the customs house agent provides services for
“turnkey” imports and exports where a lump sum amount is
charged from the client for undertaking various services. The said
lump sum amount covers not only the “agency commission” fee but
also other expenses and no separate break-up is given in respect of
these expenses. In such cases, the value of the taxable Service Tax
shall be 15% of the lump sum amount charged to the client. The
custom house agents would have to show the service charges as 15%
of such lump sum amount of the bills. Service Tax of 5% will be
chargeable on the above 15%.
      Sometimes the bills raised by the CHA are not entirely paid
by the client and the CHA is forced to give discounts. In such cases
where the final bill raised is lower than the initial bill, it may be
mentioned that the law provides for claiming of refund of excess
Service Tax paid within six months from the date of payment of
tax. If the CHA can produce evidence of having charged less service
fee, he may claim refund of excess Service Tax paid, if any, as per
the provisions of law.
                                                                    24


                    (Ministry’s F.No.B-43/1/97-TRU dt.06.06.1997)

Exemption/Exclusion:

1.    Sometimes CHAs sub-contract their work to CHAs located in
other stations. In such cases it is possible that the sub-contracting
CHA raises the bill on the main CHA who in turn raises the bill to
the client. It has been decided that in such cases the sub-contracting
CHA will not be required to pay Service Tax on the bills raised by
him on the main CHA. The Service Tax will be payable by the
CHA who provides the actual service to the client and raises the bill
to the client.
                     (Ministry’s F.No.B-43/1/97-TRU dt.06.06.1997)
2.    The payment received by the Custom House Agent from the
Shipping Lines for canvassing of Import/export cargo, would not
be chargeable to Service Tax.




                     STEAMER AGENT
                                                                    25


Date of Introduction:    15.06.1997 vide Notification No.17/97-
                    ST dt.06.06.1997.

Definition:
      “Steamer Agent” means any person who undertakes, either
directly or indirectly.
(a) to perform, any service in connection with the ship’ Husbandry
   or dispatch including the rendering of administrative work
   related thereto; or
(b) to book, advertise or canvass for cargo for or on behalf of a
   shipping line; or
(c) to provide container feeder services for or on behalf of a
    shipping     line;                    (Section 65(68)of Finance
    Act,1994 as amended)

Taxable event & Scope of service:

       Taxable service means any service provided to a shipping line,
by a steamer agent in relation to a ship’s Husbandry or dispatch or
any administrative work related thereto as well as the booking,
advertising or canvassing of cargo, including container feeder
services.
                  (Section 65(72) (i) of Finance Act, 1994 as amended)
      Seaport offices of the steamer agent, which are raising the bill
to the shipping lines, should be registered for Service Tax purpose.
The branch offices in ICDs, which are just sales offices and do not
raise any bills to the shipping line, need not be registered. This is
for the reason that billing is done by the seaport offices and not the
branch offices.
                      (Ministry’s F.No.B-43/1/97-TRU dt.06.06.1997)

Value of Taxable Service

      Value of taxable service shall be the gross amount charged by
service provider for such service rendered by him.
                                                                     26


                         (Section 67 of Finance Act, 1994 as amended)
      The value of the taxable service in relation to service provided
by a steamer agent to a shipping line, shall be the gross amount
charged by such agent from the shipping line for services in relation
to a ships Husbandry or dispatch or any administrative work
related thereto or in relation to the booking, advertising or
canvassing of cargo, container feeder services including the
commission paid to such agent.
      Steamer agents incur various types of expenses on behalf of the
shipping line such as pilottage and berth hire charges, Indian Coast
light dues paid to the port authorities, cargo expenses paid to port
authorities and transporters such as CONCOR/railways, private
transporters, chartered accountants fee, income tax, brokerage paid
on export cargo, ship handling expenses paid to stevedoring agents.
For all the above charges the Steamer agent is ordinarily reimbursed
by the shipping line.
      Further, the steamer agent bills the principals i.e. the shipping
line, for two types of service charges. One is called the husbandry
fee, which they charge for a ships husbandry. The second is the
agency commission, which is paid by the shipping line on the
import and export cargo. These commissions are usually paid as a
percentage of the net ocean freight (basic freight), which is clearly
indicated in the agreement, entered into between the steamer agent
and shipping line.
      It is clarified that in relation to the steamer agent the service
charges will constitute the Husbandry fee as well as the agency
commission on import/export cargo, other expenses incurred by
the steamer agent on behalf of the shipping line shall not be taken
into account.              (Ministry’s            F.No.B43/1/97-TRU
dt.06.06.1997)
                                                                    27




                     AIR TRAVEL AGENTS

Date of Introduction: 01.07.1997 vide Notification No.19/97-ST
                    dt.26.06.1997.

Definition:
      Air Travel Agent means any person engaged in providing any
service connected with the booking of passage for travel by air.
                    (Section 65(4) of Finance Act, 1994 as amended)

Taxable event & Scope of service:

      Taxable service means any service provided to a customer by
an Air Travel Agent in relation to the booking of passage for travel
by air.
                 (Section 65 (72) (l) of Finance Act, 1994 as amended)
      Air Travel Agent issuing air tickets against international credit
cards is required to pay service tax irrespective of the fact that the
receiver of the service, i.e. international credit card holder is an
Indian or NRI or foreigner.

Value of Taxable service:
                                                                     28


      Value of taxable service shall be gross amount charged by the
service provider for such service rendered by him and includes the
commission received by the Air Travel Agent from the Air Line.
                         (Section 67 of Finance Act, 1994 as amended)
As regards the services rendered by the air travel agents, the person
responsible for collecting the Service Tax will be the air travel
agents and the measure of the tax is the commission received by the
air travel agent from the air lines for booking of air tickets.
      It is understood that the air travel agents receives certain
commission for domestic tickets and for international tickets from
the airlines. The details of the commissions payable by any airlines
is indicated in the agency agreement entered into between the
airline and the air travel agent. The travel agent files a fortnightly
return to the airlines indicating the details of tickets booked, the
fare collected, the commission earned along with other particulars.
After adjusting the commission, be remits the balance amount to
the airlines. This fortnightly return could be made the basis for
assessment of Service Tax in respect of air travel agents.
      However, an option is also being provided to the air travel
agent to pay the Service Tax at the rate of 0.25% of the basic fare in
the case of domestic tickets and 0.5% of the basic fare in the case of
international tickets towards discharge of his Service Tax liability
instead of paying tax the tax at the rate of 5% on the actual
commission received from the air lines (Notification No.20/97-ST
refers). Basic fare is defined as that part of the fare on which
commission is payable by the airlines. It is reported that this
normality does not include the passenger service fee and the taxes.
However, this aspect may be verified by the Commissioners and
action taken accordingly.
      Cancellation or modification of tickets is a very common and
frequent feature in air travel. The air travel agent in his fortnightly
return gives the particulars of tickets cancelled or modified and
adjusts the commission accordingly subject to final approval by the
airlines. Since the commission is adjusted automatically and the
Service Tax is paid on the net commission received, the question of
                                                                   29


separately claiming refund of Service Tax may not arise. However,
care may be taken to ensure that no adjustment of commission for
the period prior to 1st July, 1997 (when no Service Tax was leviable)
is done from the commission payable from 1st July, 1997 onwards
leading to escapement of Service Tax on the services rendered from
1st July.
                       (Authority F.No.43/3/97-TRU dt. 26.01.1997)

Exemption/Exclusion:

1.    The service provided by an Air Travel Agent in relation to the
booking of passage for travel by air to UN and other international
organizations as well as the certain specified Diplomatic Missions
are exempted from payment of Service Tax.
   (Notification   No.51/98-ST      dt.15.06.1998   &      48/98-ST
dt.24.04.1998)
                                                                     30


                       MANDAP KEEPERS

Date of Introduction:01.07.1997 vide Notification No.19/97-ST
                    dt.26.06.1997.

Definition:
      “Mandap Keeper” means a person who allows temporary
occupation of a Mandap for consideration for organizing, any
official, social or business function.
                      (Section 65(39) of Finance Act, 1994 as amended)
      “Mandap” means 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 consideration for organizing any official, social or business
function.
                      (Section 65(38) of Finance Act, 1994 as amended)
      The meaning of ‘mandap’ is very wide in its coverage and
includes all immovable properties let out for organizing social,
official or business functions. It includes within its scope places like
kalyana mandaps or marriage halls, banquet halls, conference halls,
etc. Hotels and restaurants providing any such facility within their
premises for organizing any social, official or business function are
also included in the coverage of Service Tax. Therefore, the levy of
Service Tax would apply in all these cases. (Ministry’s F.No.B-
43/3/97-TRU dt.26.06.1997)
      The definition also includes mandaps, which are located or
situated within the premises of any public place of worship such as
temple, church, etc. and let out on charges.
                       (Ministry’s F.No.B-43/3/97-TRU dt.26.06.1997)

Taxable events and scope of Service:

     Taxable Service means service provided to a client, by mandap
keeper in relation to the use of mandap in any manner including the
                                                                    31


facilities provided to the client in relation to such use and also
services, if any, rendered as a caterer.
                  (Section 65(72)(m) of Finance Act, 1994 as amended)
       Any sports stadium or Gymkhana let out their premises for a
consideration for holding official, social or business functions
would fall within the purview of Mandap.
       The renting of Banquet halls for conducting the
Seminars/conferences would fall within the ambit of the definition
of the taxable service provided by a Mandap Keeper as such
seminars/conferences are considered as official/business function.
       The services provided by Clubs, by way of making the
premises available to their members on payment of fee/ charges
would fall under the category of service provided by Mandap
Keeper and would be liable for payment of Service Tax.
       Hotels and restaurants would fall into the definition of
Mandap if they let out their banquet halls, rooms, gardens etc. for
holding / organising any marriages, parties, conferences, show and
other such social/business function.
        Renting out hall/ premises etc. for purpose of holding a
dance, drama & Music programmes or competition is chargeable to
Service Tax, as the same are social functions.
       Mandap let out for stay of “Barratis” for a consideration
would attract Service Tax, as “Barratis” is a part of marriage, which
is a social function.
       Letting out of school/college building/open land for marriage
function, which is also a social function, would attract Service Tax.
       Open land /ground is to be treated as an “immovable
property” as per the definition given in section 3 of Transfer of
Property Act, 1882 and hence the above premises let out for
consideration will fall under the category “Mandap” for the levy of
Service Tax.
       The pavilion owners, either private or a Govt. undertaking are
liable to pay Service Tax under the category “Mandap keeper” for
hiring out space/stall, e.g. a trade fair, to individuals who organize
their business function as per their own requirement.
                                                                    32




Value of Taxable Service:

       The value of the taxable service shall be the gross amount
charged by the mandap keeper for such service rendered by him.
                         (Section 67 of Finance Act, 1994 as amended)
       The value of taxable service is a gross amount charged by the
Mandap Keeper from the client for use of the Mandap including the
facilities provided to the client in relation to such use and also the
charges for catering, if any.
        The Service Tax would fall not only on the hire charges for
the mandap but also charges for electricity, whether on actual basis
or otherwise, charged to the customer. The tax is to be collected on
the whole amount even if separate bills are issued one for the rental
and the other for electricity charges. The mandap keeper may also
bill the client for other services rendered by him such as charges for
providing furniture, fixtures, lighting fittings, vessels, crockery,
cutlery, etc. All these charges are includible in the value of taxable
service for the levy of Service Tax. (Ministry’s F.No.B-43/3/97-
TRU dt.26.06.1997)
        Donation is also a form of consideration for letting out the
Mandap and hence would attract Service Tax.

Exemption and Exclusion:

     1.    Where a mandap keeper also provides catering services
           that is supply of food, in addition to the lettin g out of
           the mandap and charges the customer for supply of food,
           an abatement of 40% of the total amount charged has
           been provided while computing the value of the taxable
           service. This abated value would be the value of taxable
           service in such cases. In other words, Service Tax will be
           leviable on 60% of the total amount billed in such cases
           (vide Notification No.21/97-ST dt.26.06.1997). This
                                                               33


     abatement would generally apply in the case of hotels,
     clubs, also acting as mandap keepers.

2.   The activity of shooting of Film / T.V. serial can not be
     considered to a official, social or business functions hence
     the renting out of Studio premises for such activities
     would not be covered under the category of Services
     provided by Mandap Keeper.

3.   Sales Tax, Expenditure Tax are statutory levies and
     therefore they cannot be included in the value of the
     taxable services.

4.   The charges of vessel, furniture, decoration etc provided
     by the third party other than the Mandap Keepers are
     not includible in the taxable value if the Mandap Keepers
     is not associated with such supply in any way since the
     said facility is not provided by the Mandap Keeper.

5.   Giving the theatre on rent showing the premiere shows
     of movies which is a part of entire process of making and
     releasing the feature films in cinema theatres would not
     attract Service Tax as screening of feature film in cinema
     theatre is not an official, social or business function.

6.   Some times booking is made for Mandaps are cancelled.
     In such cases the question of levy of Service Tax does not
     arrive as no service has been rendered. Service Tax need
     not be paid at the time of booking of the Mandap but
     only when the service is actually rendered and bill raised
     by the Mandap Keeper to his client. Security amount if
     any paid while booking the Mandap need not be
     included in the assessable value, if it is refunded.
                                                               34


     7.   Art Galleries are exempted. vide Board’s Circular No.
          42/05/2002-ST issued vide F.No. 176/3/2001-CX 4 dated
          29/4/2002.

Case Law:
     Constitutional validity of levy of Service Tax on Mandap
keepers was challenged by Tamil Nadu Kalyan Mandap Keepers
Association in Writ Petition no.1617/98 in the Madras High Court
which has been dismissed by the said Hon’ble Court vide order
dated 30th April 2001.




                CONSULTING ENGINEERS

Date of Introduction: 07.07.1997 vide Notification No.23/97-ST
                       dt.02.07.1997.
Definition:
       Consulting Engineer means any professionally qualified
engineer or engineering firm who, either directly or indirectly,
renders any advice, consultancy or technical assistance in any
manner to a client in one or more disciplines of engineering.
                 (Section 65(18) of Finance Act, 1994 as amended)
           Consulting engineers shall include self -employed,
professionally qualified engineers, who may or may not have
employed others to assist him or it could be an engineering firm-
                                                                     35


whether organized as a sole proprietorship, partnership, a private or
a public Ltd. Company.
                  (Ministry’s F.No.B-43/5/97 TRU dt.02.07.1997)
     Similarly, it will also include Trust and Societies &
Government Organizations. (Service Tax Through Questions &
Answers 2000 -01)

Taxable events & scope of service:
      The taxable service means any service provided to a client, by
a consulting engineer in relation to advice, consultancy or technical
assistance in any manner in one or more disciplines of engineering.
                 (Section 65(72)(g) of Finance Act, 1994 as amended)

The services, which attract the levy, include all the services which
are rendered in the capacity of a professional person and specifically
include the services pertaining to structural engineering works,
civil/mechanical/electrical engineering works or relating to
construction management. All services rendered within the above
scope of the term engineering attract Service Tax provided they are
rendered in the capacity of a consulting engineer. The scope of the
services of a consultant may include any one or more of the
following categories:
      (i) Feasibility study;
      (ii) Pre-design services/project report;
      (iii) Basic design engineering;
      (iv) Detailed design engineering;
      (v) Procurement;
      (vi) Construction supervision and project management;
      (vii) Supervision of commissioning and initial operation;
      (viii) Manpower planning and training;
      (ix) Post-operation and management;
      (x) Trouble shooting and technical services, including
             establishing systems and procedures for an existing plant.
The list is only illustrative.
                                                                    36


           In the case of the services rendered by the sub-
consultant/associate consultant to the prime consultant, the levy of
Service Tax, does not fall on the sub-consultant but only on the
prime or main consulting engineer who raises a bill on his client
(which would include the charge for services by the sub-consultant).
                     (Ministry’s F.No.B-43/5/97 TRU dt.02.07.1997)
           The service provided by consulting engineer to Central
Government/State Government Organizations or Public Sector
undertaking is also leviable to Service Tax.
                     (Ministry’s F.No.345/7/99 - TRU dt.07.06.1999)
      If the firms are manufacturing tailor made items and are also
engaged in drawing, designing, erection & commissioning of the
machinery at site, all the essential ingredients of ‘Consulting
Engineers’ i.e. advice, consultancy & technical assistance are present
and therefore, they would be liable for payment of Service Tax.
     Service Tax would be payable in the event of consulting
engineers are sent on deputation/secondment to other firms.
     Services rendered by Agency authorized by Director of
Explosive, Nagpur to conduct inspection and certify
roadworthiness of LPG Tanker attract Service Tax as Consulting
Engineer.
     The service provided by Engineer Valuers regarding valuation
of immovable property and plant & machinery would fall within
the purview of Consulting Engineers and is liable for payment of
Service Tax.

Value of Taxable Service:
      The value of taxable service shall be the gross amount charged
by consulting engineer for advice, consultancy or technical
assistance in any manner in one or more disciplines of engineering.
If payment from the client is received in different stages, Service
Tax is required to be paid on payments received at each stage from
the client. If there is any modification in payment, the same need to
be adjusted when final payment is received.        (Section 67 of
Finance Act, 1994 as amended)
                                                                    37


       In the case of amount received in convertible foreign exchange
is leviable to Service Tax, the rate of conversion of foreign currency
into Indian Rupees is the rate prevailing on the date on which
payment is made by service receiver.

Exemption and Exclusion:
1.  Taxable service provided to any person by a Consulting
    Engineer in relation to Computer Software, is exempted from
    the whole of Service Tax leviable thereon vide notification no.
    4/99 ST dtd.28/2/99.
2.  The deduction from the value for levy of Service Tax would
    be allowed for the amount incurred by the consulting engineer
    on behalf of the client towards expenses, which are reimbursed
    on actual basis and in case, where the client is billed on a lump
    sum basis, any deduction from the same on account of
    reimbursable expenses for the purpose of determining the
    value of taxable service are permitted on the basis of
    documentary evidence adduced by the consulting engineer.
                   (Ministry’s F.No.B-11/3/98 TRU dt.07.10.1998)
3.  The service provided by qualified engineers in the area of
    Insurance survey and loss assessment would not be leviable to
    Service Tax under the category of Consulting Engineer.
               (Ministry’s F.No.345/5/2001 TRU dt.30.04.2001)

Case Law:
     Hon’ble Madras High Court in the case of V.Shanmughavel v.
Commissioner of Central Excise, Chennai-II [2001(131) E.L.T. 14
(Mad)] has held that registered valuers of Plant & Machinery and
immovable property would fall within the ambit of Consulting
Engineers, that Service Tax is not a tax on profession and hence not
beyond the legislative competence of Parliament and that the tax on
Consulting Engineers is not violative of Article 14 of the
Constitution.
                                                                    38




          MAN POWER RECRUITMENT AGENCY

Date of Introduction: 07.07.1997 vide Notification No.23./97-ST
                         dt.02.07.1997
Definition:
      “Manpower recruitment agency " means any commercial
concern engaged in providing any service, directly or indirectly, in
any manner for recruitment of manpower, to a client.
                    (Section 65(40) of Finance Act, 1994 as amended)
Taxable event and Scope of service:
      Taxable service means any service provided to a client, by a
manpower recruitment agency in relation to the recruitment of
manpower in any manner.
                 (Section 65(72) (k) of Finance Act, 1994 as amended)
The coverage of the term “manpower recruitment agency” is wide
and includes within its ambit, the services provided by an agency
from the primary stage of building a database of manpower for
different categories of personnel employment, whether white collar
or blue collar, whether for employment in India or overseas,
determining manpower requirement for the client, preliminary
identification, short-listing and screening of prospective candidates,
providing specialists for interviewing prospective candidates,
arranging for their interviews at each stage; placing advertisements
for recruitment of manpower in the print or electronic media, etc.
Service Tax on manpower recruitment agency shall cover services
provided by a man-power recruitment agency to a client from the
initial stage of selecting/identifying man-power required for any
prospective employment, till the stage of actual selection for the
same. In cases, where a person approaches a manpower recruitment
agency for being employed in a suitable position abroad, the
prospective candidate for employment becomes the client for
                                                                    39


purposes of Service Tax.            (Ministry’s F.No.B43/5/97-TRU
dt.02.07.2001.)
      The academic institutions, recruiting their students for
industrial establishment on receipt of payment fall within the scope
of definition of term “Manpower recruitment agency” and become
liable to pay service tax. Similarly the trusts providing the services
of manpower recruitment agency are also liable to pay service tax
under the category of “manpower recruitment agency”.

Value of Taxable Service:
       Value of taxable service shall be the gross amount charged by
the service provider for such service rendered by him.
                          (Section 67 of Finance Act, 1994 as amended)
       The manpower recruitment agency receives remuneration
from the client for the services rendered by him as per the
stipulations in the contract/agreement between them.               The
payment from the client is received at different stages, based on the
completion of work/service at each stage.              The manpower
recruitment agency shall be required to pay Service Tax on the
payments received at each stage from the client by the 25 th of the
succeeding month / 25th of the month immediately following the
quarter, as the case may be. Subsequent modifications, if any, in the
bills raised to the client at the time of final payment may be allowed
after verification.
                       (Ministry’s F.No.B43/5/97-TRU dt. 02.07.1997)
Explanation & Exclusion:

1.    Service Tax on manpower recruitment agencies shall be the
gross amount charged to the client for services rendered in relation
to the recruitment of manpower excluding the amount incurred by
the manpower recruitment agency on behalf of the client towards
expenses, which are reimbursed on actual basis.                 The
Commissioners may selectively, in doubtful cases require the
manpower recruitment agency to substantiate such actual expenses
on the basis of documentary evidence. In case the manpower
                                                                   40


recruitment agency is billing the client on the basis of a lumpsum,
any deductions from the same on account of reimbursable expenses,
for the purposes of determining the value of taxable service may be
permitted on the basis of documentary evidence adduced by the
agency. (Ministry’s F.No.B43/5/97-TRU dt.02.07.1997)

2. The labour contractors, who supplied their own labour on
contract could not be covered under the definition of “manpower
recruitment agency”.




      CLEARING AND FORWARDING AGENTS

Date of Introduction: 16.07.1997 vide Notification No.26/97-ST
                         dt.11.07.1997.
Definition:
     “Clearing and forwarding agent” means any person who is
engaged in providing any service, either directly or indirectly,
concerned with the clearing and forwarding operations in any
manner to any other person and includes a consignment agent.
                    (Section 65(16) of Finance Act, 1994 as amended)
Taxable event & Scope of Service:
     Taxable service means any service provided to a client, by a
Clearing & Forwarding Agent in relation to clearing & forwarding
operations, in any manner.
                 (Section 65(72) (j) of Finance Act, 1994 as amended)
     The clearing and forwarding agents are engaged / appointed
by manufacturer of goods (both excisable and non-excisable goods),
producers and distributors of goods and shall also include such
agents appointed for agricultural and mineral goods.
     Normally, there would be a contract between the principal
and the clearing and forwarding agent detailing the terms and
                                                                    41


conditions and also indicating the commission or remuneration to
which the C&F agent is entitled.
A clearing and forwarding agent normally undertakes the following
activities:
(a) receiving the goods from the factories or premises of the
    principal or his agents;
(b) warehousing these goods;
(c) receiving dispatch orders from the principal;
(d) arranging dispatch of goods as per the directions of the principal
    by engaging transport on his own or through the authorized
    transporters of the principal;
(e) maintaining records of the receipt and dispatch of goods and the
    stock available at the warehouse;
Service Tax is payable on above services.
                       (Ministry’s F.No.B43/7/97-TRU dt.11.07.1997)
       If factories or persons are engaging brokers for sending their
goods directly to their customers, on the basis of orders procured
by them, services rendered by brokers would amount to services
provided by a Clearing& forwarding Agents and would be liable for
payment of Service Tax.

Value of Taxable Service:
     The value of taxable service shall be the gross amount charged
by the service provider for such service rendered by him.
                        (Section 67 of Finance Act, 1994 as amended)

     However as per sub rule (8) of Rule 6 of Service Tax Rules,
1994 the value of taxable service in relation to the services provided
by a clearing and forwarding agent to a client for rendering services
of clearing and forwarding operations in any manner shall be
deemed to be the gross amount of remuneration or commission (b y
whatever name called) paid to such agent by the client engaging
such agent.
                                                                 42


      For the services rendered, the C & F agent receives
commission or remuneration, which usually consists of two
components:
   1. minimum commission on a flat rate or turnover basis
      depending on the packages/consignments handled, and
   2. a variable commission based on performance which is
      computed on the performance indicators agreed upon between
      the agent and the principal.
The above two constitute the remuneration or commission paid to
the C & F agent by the principal.

Case Laws:
     In the case of Laghu Udyog Bharati and other v. U.O.I. and
others [1999 (112) ELT 365 (SC)], the Supreme Court was
examining whether provisions in Rule 2(XII) and (XVII) of the
Service Tax Rules, 1994 (as amended in 1997) are contrary to
provisions of Sections 65 and 66 of the Finance Act, 1994. The said
Rule 2(XII) stipulated that:

     “in relation to services provided by a clearing and
     forwarding agent, every person who engages a clearing
     and forwarding agent and by whom, remuneration or
     commission (by whatever name called) is paid for such
     services to the said agent.”

      The Hon’ble Supreme Court, after analysing various
provisions of Chapter V of the Finance Act, 1994 as amended, has
referred to provisions in Sec tion 68 (1A), which was introduced by
the Finance Act, 1997. The section provided that the Service Tax
introduced by the Finance Act, 1997. The section provided that the
Service Tax for such service was to be collected from such person
and in such manner as may be prescribed and to such person all the
provisions shall apply as if he is the person responsible for
collecting the Service Tax in relation to such service. The Apex
Court then observed “as we read Section 68, it does not in any way
                                                                  43


seek to alter or change the charge of Service Tax levied under
Section 66 which is on the person responsible for collecting the
Service Tax. It also does not to our mind, in any way, amend any
of the sub-sections of Section 65, which contains the definition of
different expressions. All that Section 68(1A) enables to be done is
that with regard to assessees or the persons who are responsible for
collecting the Service Tax, the individual or the officer concerned
can be identified and it is that person who would be a person
responsible for collecting the Service Tax. In other words, this
provision, namely Section 68 (1A) cannot be so interpreted, as to
make a person as an assessee even though he may not responsible
for collecting the Service Tax. The Service Tax is levied by reason
of the services, which are offered. The imposition is on the person
rendering the service. Of course, it may be indirect tax, it may be
possible that the same is passed on to the customer but as for the
levy and assessment is concerned it is the person rendering the
service who alone can be regarded as an assessee and not the
customer. This is the only way to provisions can be read
harmoniously.”
      The Apex Court, thereafter, analysed the provisions in Section
70, (person responsible for collecting Service Tax to furnish
prescribed return), section 71 (Assessment) and section 94 (power of
Central Government to make Rules) and held that “we have no
hesitation in holding that the provisions of Rule 2(d) (XII) and
(XVII), in so far as it makes persons other than the clearing and
forwarding agents or the persons other than the goods transport
operator as being responsible for collecting Service Tax are ultra-
vires the Act, itself. The said sub-rules are accordingly squashed”.
The Supreme Court, thereafter, ordered that “any tax which has
been paid by customers or clients of the clearing and forwarding
agents as of the goods transport operator shall be refunded within
twelve weeks on their making a demand for refund.”
      This decision was delivered by the Apex Court on 27 th July,
1998 but in the meantime, the said Rule 2(d) (XII) was substituted
vide Service Tax (Amendment) Rules, 1998 effective from
                                                                   44


16.10.1998. The substituted Rule 2(d) (III) reads as “in relation to
services provided by a clearing and forwarding agent, every person
who engages a clearing and forwarding agent and by whom
remuneration or commission (by whatever name called) is paid for
such services to the said agent”.
      However, the said Rule 2(d) (iii) was omitted vide Notification
No.7/99-ST, dt.23.08.1999 by the Service Tax (second amendment)
Rules, 1999 with effect from 01.09.1999.
                                                                   45


            RENT- A- CAB SCHEME OPERATORS

Date of Introduction: 01.04.2000 vide Notification No.3/99-ST
                          dt.28.02.1999.
Definition:
      “Rent a cab scheme operator” means any person engaged in
the business of renting of cabs.
                    (Section 65(59) of Finance Act, 1994 as amended)
      The new definition of rent a cab scheme operator introduced
in the Finance Act, 1998, is effective from 16 th October, 1998
onward. This definition is wider in scope than the earlier definition
which only included a person who was the holder of a licence under
the Rent-a-Cab-Scheme, 1989 framed by the Central Government
under the Motor Vehicles Act, 1988 (59 of 1988), as a rent-a-cab-
scheme operator. Under the Rent-a-Cab-Scheme, 1989 framed
under the Motor Vehicles Act, 1988, a licence is granted only in case
a person has a minimum of 50 cabs. This meant that a person who
had less number, say 5 or 10 cabs and was also engaged in the
business of car rental was not liable to pay Service Tax on the
services of renting of cabs. Consequent upon the revised definition,
which has a wider scope, such persons who are engaged in the
business of renting of cabs even if not covered under the Rent a Cab
Scheme, 1989, framed under the Motor Vehicles Act, 1988, will also
be now required to pay Service Tax on the services of renting of
cabs.            (Ministry’s F.No.B11/3/1998-TRU dt.07.10.1998)

Taxable events and scope of service:
     The taxable service rendered by a Rent a cab scheme operator
means any service provided to any person, by a rent a cab scheme
operator in relation to the renting of a cab.
                 (Section 65(72)(o) of Finance Act, 1994 as amended)

Value of the Taxable Service:
     The value of taxable service shall be the gross amount charged
by the service provider for such service rendered by him.
                                                                   46


                       (Section 67 of Finance Act, 1994 as amended)
      Any other charges billed to the customer such as processing
charges, administrative fees, charges for providing extra accessories
or providing other value added services such as a provision of driver
etc. shall also be includible in the gross amount chargeable to
Service Tax.
                  (Ministry’s F. No. B 43/7/97-TRU dt. 11.07.1997)

Exemption & Exclusion:
      Service Tax will not be payable in cases where a bill has been
raised on a Rent a Cab Scheme operator, by another rent-a-cab
scheme operator who has sub-let the motor cab to the latter
operator provided he pays Service Tax on the amount billed to his
client for renting out the motor cab so obtained by him.
                     (Ministry’s F.No.B43/7/97-TRU dt.11.07.1997)
                                                                    47




                       TOUR OPERATOR

Date of Introduction: 01.09.1997 vide Notification No. 37/97-ST
                          dt.22.08.1997.
Definition:
       “Tour Operator” means any person engaged in the business of
operating tours in a tourist vehicle covered by a permit granted
under the Motor Vehicles Act, 1988 (59 of 1988) or the Rules made
there under.            (Section 65(78) of the Finance Act, 1994 as
amended)
       “Tour” means a journey from one place to another
irrespective of the distance between such places.
                 (Section 65(76) of the Finance Act, 1994 as amended)
       “Tourist Vehicle” has the meaning assigned to it in clause (43)
of Section 2 of the Motor Vehicles Act, 1988 (59 of 1988). The same
is cited hereunder:
       “`Tourist Vehicle’ means a contract carriage constructed
       or adapted and equipped and maintained in accordance
       with such specifications as may be prescribed in this
       behalf.
                 (Section 65(77) of the Finance Act, 1994 as amended)
       Section 2(7) of the Motor Vehicle Act defines a ‘Contract
Carriage’ as follows:
       “`Contract Carriage’ means a motor vehicle which carries
       a passenger or passengers for hire or reward and is engaged
       under a contract, whether express or implied, for the use
       of such vehicle as a whole for the carriage of passengers
       mentioned therein and entered into by a person with a
                                                                   48


     holder of a permit in relation to such vehicle or any
     person authorised by him in this behalf on a fixed or an
     agreed rate or sum--
          a) on a time basis, whether or not with reference to
          any route or distance; or
     b) from one point to another;
     and in either case, without stopping to pick up or set
     down passengers not included in the contract anywhere
     during the journey, and includes;-
     i.   a maxi-cab; and
     ii.  a motor-cab not-withstanding that separate fares are
          charged for its passengers.


Taxable event and scope of service:
      Taxable service means any service provided to any person, by
a tour operator in relation to a tour.
             (Section 65(72) (n) of the Finance Act, 1994 as amended)
      The revised definition of “Tour Operator” as above was
notified with effect from 16.10.98. With this change “non-permit
holders” who operate as tour operator by using tourist vehicle,
which may have been leased or hired from persons who hold tourist
permits are also covered under the definition of tour operator and
liable to pay Service Tax.
                     (Ministry’s F.No.B-11/3/98-TRU dt.07.10.1998)

Value of Taxable Service:
     The value of taxable service shall be the gross amount charged
by the service provider for such service rendered by him.
                    (Section 67 of The Finance Act, 1994 as amended)
Exemption & Exclusion:
  1.    The services provided by Tour Operators were exempted
        from payment of Service Tax upto 31.03.2000 by virtue of
        Notification No.52/98-ST dt.18.07.1998. However, since
        this notification has not been renewed; the services of tour
                                                                   49


     operators have again become liable to Service Tax w.e.f.
     01.04.2000.
2.   The service provided by tour operator to the United
     Nation or an International Organization is exempted from
     payment of Service Tax. “International Organization”
     means an international organization declared by the Central
     Government in pursuance of Section 3 of the United
     Nations (Privileges and Immunities) Act, 1947 (46 of 1947),
     to which the provisions of the scheduled to the said Act
     apply, vide notification no. 48/98 -ST dt.24.04.1998.
3.   Service provided by the tour operator to the specified
     Diplomatic Missions is exempted from Service Tax vide
     Notification No.50/98-ST dt. 15.06.1998.
4.   Service provided by the tour operator is exempted from so
     much of the Service Tax levy-able on such operator, as is in
     excess of the amount of Service Tax calculated on forty per
     cent of the gross amount charged from any person by such
     operator for the services provided in relation to a tour,
     where the tour operator provides a package tour to any
     person and the bill issued for this purpose indicates that it is
     inclusive of charges for such a tour.
                         (Notification No.39/97 -ST dt.22.08.1997)
      ‘Package Tour’ means a tour in which provisions for
     transportation and accommodation for stay of the
     person undertaking the tour has been afforded by the
     tour operator.
5.   Abatement for Service Tax on tour operator is available
     when cost of accommodation is included in value o f taxable
     service. Under Notification No.40/97-ST datd.22.08.1997
     there is another provisions for partial exemption from
     Service Tax liability on the gross value of taxable service in
     excess of 10% of such taxable amount charged by the
     operator in relation to tour. This is subject to the condition
     that :-
                                                                      50


        The operator is providing services solely of arranging or
        booking accommodation for any person in relation to that
        tour & the bill issued should specifically state so;
        It should be noted that in case the bill issued to the client is
        only in respect of service charges for arranging or booking
        accommodation and does not include the cost of such
        accommodation, this provision shall not be applicable.
  6.    Service Tax on Tour Operator on tours abroad
        Service Tax on services rendered by Tour Operator is only
        on Services rendered in India in respect of a tour within
        Indian Territory. Services rendered by tour operators in
        respect of out-bound tourism i.e. for tours abroad, do not
        attract Service Tax. In case of a composite tour, which
        combines tours within India and also outside India, Service
        Tax will be leviable only on services rendered for tours
        within India provided that separate billing has been done by
        the tour operator for services provided in respect of tours
        within India.
               (Authority: Para 2.6 of letter F.No.B.43/10/97-TRU)



                           ARCHITECT

Date of Introduction: 16.10.1998 vide Notification No.53/98-ST
                          dt.07.10.1998.
Definition:
            “Architect” means any person whose name is for the
time being, entered in the register of architects maintained under
section 23 of the Architects Act, 1972 and also includes any
commercial concern engaged in any manner, whether directly or
indirectly, in rendering services in the field of architecture.
                      (Section 65(6) of Finance Act, 1994 as amended)
Taxable events and scope of service:
                                                                   51


      Taxable service means any service provided to a client, by an
architect in his professional capacity, in any manner.
                  (Section 65(72)(p) of Finance Act, 1994 as amended)
      The nature and scope of the services rendered by architects are
well delineated under the provisions of the Architects Act. Broadly,
the work of an architect starts from providing appropriate advice
keeping in view the requirements of the client at the preliminary
stage of initial sketche s, specifications and drawing of plans, and
consists of providing detailed drawings, approval of the drawings
from the concerned authorities, supervision at each stage of
construction, and till the point when the completion certificate is
obtained from the authorities.
                     (Ministry’s F.No.B-11/3/98-TRU dt. 07.10.1998)

Value of Taxable Service:
      Value of the taxable service shall be the gross amount charged
by an architect for services rendered in his professional capacity in
any manner. The services rendered by Architect are of a diverse
nature and spread over long period of time. The payment of fees
for each service is normally spelt out in the contract entered into
with the client. The fees are paid at periodic intervals depending on
the pace of completion of the work or at the completion of the
whole project. Service tax has to be paid accordingly in terms of
the contract.
                        (Section 67 of Finance Act, 1994 as amended)



Exemption and Exclusion:
1.    In cases where an architect sub-contracts part/whole of his
work to another architect, no Service Tax is required to be paid by
the sub-contractor provided the principal architect has paid the
Service Tax on the full value of services rendered by him to the
client including the service provided by sub-contractor and
provided the sub-contracting is in respect of the same service
                                                                    52


category. If the sub-contractor chooses to charge the client of
principal contractor, in that case, the sub-contractor has to pay
Service Tax.
2.     Out of pocket expenses, which are reimbursable on actual
basis, such as traveling, boarding and lodging expenses, are not
includible in the value for levy of Service Tax. However, the
assessee is required to produce documentary evidence for the
purpose.
                    (Ministry’s F.No.B-11/3/98-TRU dt. 07.10.1998)
Case Law:
 i.    Hon’ble Mumbai High Court has dismissed the Writ Petition
No.1174/2000 filed by Indian Institute of Architect, charging the
constitutionality of the levy alleging hostile discrimination.
ii.    Hon’ble Gujarat High Court in SCA No.7220/99 filed by the
Gujarat Institute of Civil Engineers and Architects passed the
decision in which the Writ Petition has been finally dismissed.
       With the result of above dismissals of Writ Petitions, the levy
of Service Tax on the service provided by the Architect is held
valid.




                   INTERIOR DECORATOR
                                                                    53




Date of Introduction: 16.10.1998 vide Notification No.53/98-ST
                        dt.07.10.1998.
Definition:
“Interior decorator” means any person engaged, whether directly or
indirectly, in the business of providing by way of advice,
consultancy, technical assistance or in any other manner, services
related to planning, design or beautification of spaces, whether man-
made or otherwise and includes a landscape designer.
                 (Section 65 (34) of Finance Act, 1994 as amended)

Taxable event and scope of service :
Taxable service means any service provided to a client, by an
interior decorator in relation to planning, design or beautification
of spaces, whether man-made or otherwise, in any manner.
                  (Section 65(72)(q) of Finance Act, 1994 as amended)
      The project which started before 16th Oct., 1998 and still
continuing after 16th Oct., the Service Tax is payable only in respect
of services rendered on or after the date on which the Service Tax
provisions came into force i.e. 16 th October, 1998. Service Tax is
not required to be paid on payment received for services rendered
prior to the service concerned being notified.
                      (Ministry’s F.No.B-11/3/98-TRU dt.07.10.1998)
Value of Taxable Service:
      Value of the taxable service in relation to the service provided
by an interior decorator to a client, shall be the gross amount
charged by such decorator from the client for services rendered in
relation to planning, design or beautification of spaces in any
manner.
                         (Section 67 of Finance Act, 1994 as amended)
Exemption and Exclusion:
1.    In cases where an interior decorator sub-contracts part/whole
of his work to another interior decorator, no Service Tax is
required to be paid by the sub-contractor provided that the
princip al interior decorator has paid the Service Tax on the services
                                                                    54


rendered by him to the client and provided the sub-contracting is in
respect of the same service category.
2.    The services rendered by Art directors of films and others
who render services of design etc. for setting up temporary
structures/settings for shootings, etc. do not attract Service Tax as
such interior decoration has no permanency and is only of a
temporary nature.
3.    The Service Tax is not leviable on supply of materials, items of
furniture or decoration, per se, but only on services rendered in any
manner concerning planning, design or beautification of spaces.
4.    Out of pocket expenses which are reimbursable on actual
basis, such as traveling, boarding and lodging expenses are not
includible in the value for levy of Service Tax. The assessee is
required to produce documentary evidence for the purpose.
                    (Ministry’s F.No.B-11/3/98-TRU dt. 07.10.1998)
                                                                    55




               MANAGEMENT CONSULTANT

Date of Introduction: 16.10.1998 vide Notification No.53/98-ST
                       dt.07.10.1998.
Definition:
     “Management Consultant” means any person who is engaged
in providing any service, either directly or indirectly, in connection
with the management of any organization in any manner and
includes any person who renders any advice, consultancy or
technical assistance, relating to conceptualizing, devising,
development, modification, rectification or upgradation of any
working system of any organization.
                   (Section 65(37) of Finance Act, 1994 as amended)

Taxable event and scope of service :
     Taxable service means any service provided to a client, by a
management consultant in connection with the management of any
organization in any manner.
                 (Section 65(72) (r) of Finance Act, 1994 as amended)
    Service rendered in respect of Merger and Acquisition is leviable
to Service Tax under the category of Management Consultant upto
15.07.2001 thereafter the same is leviable to Service Tax under the
category of banking and other financial services.
                (Ministry’s F.No.177/2/2001 CX-4 dt.27.06.2001)
     The activities of rendering lectures/briefs/advise to the
Management Association Members relate to upgradation of Human
Resources of an organization and therefore these services attract
Service Tax under the category of Management Consultant.
        (Ref. Service Tax through Questions & Answers, 2000-2001)
Value of Taxable Service:
                                                                      56


Value of the taxable service in relation to the service provided by a
management consultant to a client, shall be the gross amount
charged by such consultant from the client for services rendered in
connection with the management of any organization in any
manner.
                          (Section 67 of Finance Act, 1994 as amended)
Exemption/Exclusion:
1.     If the management consultant renders any service to a client
located abroad, the charges received by him for such consultancy
service is not liable to service tax. However, if the management
consultant has provided any consultancy service to a foreign
company in India and received payment for such services, the same
is liable to service tax.
2.     Service rendered by practitioner of law, ESI, PF, etc. are in the
nature of providing specialized professional assistance or secretarial
assistance for filing various declarations/forms etc., maintenance of
records etc. Such services do not make any change or improvement
in the existing system of management of organizations. Such
persons are not covered by management consultant.
                                                                    57




       PRACTISING CHARTERED ACCOUNTANT,
         PRACTISING COST ACCOUNTANT &
         PRACTISING COMPANY SECRETARY

Date of Introduction: 16.10.1998 vide Notification No.53/98-ST
                    dt.07.10.1998.
Definition:

1.    “Practising Chartered Accountant” is a person who is a
member of the Institute of Chartered Accountants of India and is
holding a certificate of practice granted under the provisions of the
Chartered Accountants Act, 1949 and includes any concern engaged
in rendering services in the field of chartered accountancy.
                     (Section 65(52) of Finance Act, 1994 as amended)
2. “Practising Cost Accountant” is a person, who is a member of
the Institute of Cost and Works Accountants of India and is holding
a certificate of practice granted under the provisions of the Cost and
Works Accountant Act, 1959 and includes any concern engaged in
rendering services in the field of cost accountancy.
                      (Section 65(53) of Finance Act, 1994 as amended)
3.    “Practising Company Secretary" is a person who is a
member of the Institute of Company Secretaries of India and is
                                                                     58


holding a certificate of practice granted under the provisions of the
Company Secretaries Act, 1980 and includes any concern engaged
in rendering services in the field of company secretary ship.
                    (Section 65(54) of Finance Act, 1994 as amended)

Taxable event and scope of service :
1.    Taxable service means any service provided to a client, by a
practising chartered accountant in his professional capacity, in any
manner.          (Section 65(72) (s) of Finance Act, 1994 as amended)
2.    Taxable service means any service provided to a client, by a
practising cost accountant in his professional capacity, in any
manner.                        (Section 65(72) (t) of Finance Act,
1994 as amended)
3.    Taxable service means any service provided to a client, by a
practising company secretary in his professional capacity, in any
manner.                 (Section 65(72) (u) of Finance Act, 1994 as
amended)

4.    The following services, which are provided by practising
Chartered Accountant, a practising Cost Accountant or Company
Secretaries in their professional capacity to a client and are rendered
by them either exclusively or are common to their profession, are
liable for payment of Service Tax. In case of service provided by the
practising Chartered Accountant, a practising cost accountant or
company secretaries, the taxab le services are,
(i) accounting and auditing; or
(ii) cost accounting and cost auditing; or
(iii) secretarial auditing; or
(iv) verification of declarations in prescribed forms of
      compliance's for obtaining a Certificate of commencement of
      business or commencement of other business under section
      149 of the companies Act, 1956 ( 1 of 1956); or
(v) signing of the annual return of listed companies under section
      161 of the companies act, 1956( 1 of 1956) ; or
(vi) certification that requirement of Schedule XIII to the
      Companies Act, 1956 (1of 1956) have been complied with as
                                                                    59


       regards statutory guidelines for appointment of managerial
       personnel and payment of managerial remuneration to them
       without the approval of the Central Government under
       Section 269 and Schedule XIII of the Companies Act, 1956( 1
       of 1956) ; or
(vii) Certification of documents to be filed by Companies with the
       registrar of Companies under         Companies Act, 1956(1 of
       1956); or
(viii) Certification in Form 1 that the whole of the amount
       remaining unpaid or unclaimed for a period of three years
       from the date of transfer to the special account under sub-
       section (1) and sub-section (2) of section 205A of the
       Companies Act, 1956 (1 of 1956) has been transferred to the
       General Revenue Account of the Central Government under
       the Companies unpaid Dividend (Transfer to General revenue
       Account of the Central Government) rules, 1978; or
(ix) Certification of documents under the Exports and Imports
       Policy (1997-2002) of the Government of India; or
(x) Certification for exchange control purposes which a practising
       chartered accountant can issue as documentary evidence in
       support of certain applications under the Foreign Exchange
       Regulation Act, 1973 (46 of 1973); or
(xi) Certification in respect of valuation of instrument or assets as
       per rule 8A (7) of the wealth tax rules, 1957
                              (Notification No.59/98 -ST dt.16.10.1998)
       Thus, in case any of the above mentioned services are rendered
to a client by either a practising chartered accountant or a practising
company secretary or a practising cost accountant, the same would
attract Service Tax. For example, Certification services for exchange
control purposes provided by a practising chartered accountant or a
practising company secretary or a practising cost accountant under
the Foreign Exchange Regulation Act, 1973 to a client shall attract
Service Tax. Similarly in a case where services of accounting or
auditing or costing or certification related thereto are provided by a
practicing chartered accountant or a practising company secretary
                                                                   60


or a practising cost accountant, the same shall attract Service Tax.
Another example are the cases where a practising chartered
accountant or a practising company secretary or a practising cost
accountant provides services to a client of appearing before the
Foreign Exchange Appellate tribunal or the Income Tax Appellate
Tribunal as his authorized representative. He shall be exempt from
paying Service Tax on such services to the client, as the service in
question is not covered in the list of services mentioned above.
           (Ministry’s F. No. 11/3/98 -TRU dt.20.10.1998)

Value of Taxable Service:

      In the case of practising Chartered Accountant, Practising
Cost Accountant and Practising Company Secretary –
      “Value of taxable service shall be the gross amount charged by
the service provider for such services rendered by him.”
                        (Section 67 of Finance Act, 1994 as amended)
Exemption and Exclusion:
1.    The services other than those mentioned in Sr.No.4 of
Taxable events and scope of services above are exempted from
payment of Service Tax. (Authority: Notification no. 59/98 ST
dt.16.10.1998).




Case Law:
      Constitutional validity of Service Tax leviable on the
services provided by Practising Chartered Accountant was
challenged by All India Federation of Tax Practioner’s &
Others before the Hon’ble Mumbai High Court in Writ
Petition No.142/99 and the said Hon’ble Court has dismissed
the petition vide order dtd.22-2-2001. The main ground held
by the Court was that such a levy is, in pith and substance, a
levy on the profession, and as such falls within the legislative
competence of the States only. It was also contended that the
                                                                    61


distinction made between professionally qualified Chartered
Accountant and other tax practitioners who render similar
services, and bringing the former alone into the tax net is
discriminatory. The High Courts rejected both the
contentions, and held that the very fact that Parliament has
levied tax on service rendered by the professionals with
reference to gross receipts received by them for the services
makes it clear that the levy is not a tax on professions, since
profession tax levied by the States is a tax levied on a person
because he is carrying on a profession, irrespective of his
income. The classification adopted as between the qualified
professionals and others was also held to be reasonable and not
arbitrary, since the nature of services provided by a qualified
Chartered Accountant is bound to be qualitatively higher than
the services rendered by non qualified person. The Court also
held that the apprehension that the professionals would be
required to pay service tax even if their clients did not pay the
fees was misplaced, since Section 68 of the Act provides the
requisite protection to cater to such cases.




                  REAL ESTATE AGENT

Date of Introduction: 16.10.1998 vide Notification No.53/98-ST
                    dt.07.10.1998.
Definition:
                                                                     62


      A “Real estate agent” means a person who is engaged in
rendering any service in relation to sale, purchase, leasing or
renting, of real estate and includes a real estate consultant.
                     (Section 65 (56) of Finance Act, 1994 as amended)
      “Real estate consultant” means a person who renders in any
manner, either directly or indirectly, advice, consultancy or
technical assistance, in relation to evaluation, conception, design,
development,        construction,      implementation,      supervision,
maintenance, marketing, acquisition or management, of real estate.
                      (Section 65(57) of Finance Act, 1994 as amended)
Taxable event & Scope of service:
      Taxable service means any service provided to a client, by a
real estate agent in relation to real estate.
                 (Section 65 (72) (v) of Finance Act, 1994 as amended)
      Some international realty concerns, such as Richard Ellis,
Colliers and Jardine etc. have opened shop in India and they are
providing comprehensive realty services.              Apart from the
traditional services in respect of sale/purchase/leasing of real estate
such concerns are, inter alia, providing services to real estate
developers and promoters in respect of evaluation of a proposed real
estate scheme/project by conducting techno-economic studies,
providing feasibility reports and by even helping in marketing real
estate projects. Such services shall also attract Service Tax.
      (Ministry’s F.No.B11/3/98 -TRU dt.07.10.1998)

Value of Taxable Service:

     Value of the taxable services shall be the gross amount charged
by the service provider for such service rendered by him.
                       (Section 67 of Finance Act, 1994 as amended)




Exemption & Exclusion:
                                                                    63




      The activity of actual construction of any building, carried out
by builders/developers would not attract Service Tax levy, as it is
not a service within the meaning of the term real estate agent or real
estate consultant.                  (Ministry’s F.No.B11/3/98-TRU
dt.07.10.1998)
                                                                    64


                       SECURITY AGENCIES

Date of Introduction: 16.10.1998 vide Notification No.53/98-ST
                         dt.07.10.1998.
Definition:
      “Security agency” means a commercial concern engaged in the
business of rendering services relating to the security of any
property, whether movable or immovable, or of any person, in any
manner and includes the services of investigation, detection or
verification, of any fact or activity, whether of a personal nature or
otherwise, including the services of providing security personnel for
watch and ward activities.
                     (Section 65(62) of Finance Act, 1994 as amended)
Taxable event and scope of service :
      Taxable service means any service provided to a client, by a
security agency in relation to the security of any property or
person, by providing security personnel or otherwise and includes
the provision of services of investigation, detection or verification
of any fact or activity.
                  (Section 65(72)(w) of Finance Act, 1994 as amended)
      The ambit of the term security agency is wide enough to
include not only agencies rendering se rvices of providing security
but also detective agencies, which are providing confidential services
in respect of say, financial credibility of any person, trade mark/
copyright infringements etc.        (Ministry’s F.No.D-11/3/98 - TRU
dt.07.10.1998)

Value of Taxable service:

      Value of the taxable service in relation to the service provided
by a security agency to a client, is the gross amount charged by such
agency from the client for services rendered in connection with the
security of any property or per son, and includes services of
investigation, detection or verification of any fact or activity
                                                                    65


including services of providing security personnel.     (Section 67 of
Finance Act, 1994 as amended)

      No, abatement from the amount charged to the client for
services rendered is available for purposes of computing the Service
Tax liability. However, abatement in respect of statutory levies and
taxes can be granted provided the same has some direct relation
with the services rendered to the client, specifically billed to the
client and is reimbursable by the client on an actual basis. Statutory
levies of the kind like EPF, ESI contribution towards labour welfare
fund etc. are required to be borne by all types of employers and not
only security agency. Such statutory levies have no direct co-
relation with the services rendered to the client (in as much as the
same arise out of employer-employee relationship) and are not
specifically relatable to the services rendered to the client.
Therefore, no abatement in respect of the such statutory levies is
admissible for the purposes of computing the Service Tax liability.
      (Ministry’s F.No.B-11/3/98-TRU dt.07.10.1998)
                                                                      (
Exemption and Exclusion:
i.    The services provided by the security agency in relation to the
services of providing safe deposit lockers or safe vaults for security
of movable property are exempted from payment of Service Tax on
the gross amount charged from the client for such services, vide
Notification No.56/98 ST dated 07.10.98.
ii.   Out of pocket expense s which are reimbursable on actual
basis, such as travelling, Boarding and Lodging expenses are not
includible in the value for levy of Service Tax. The assessee is
required to produce documentary evidence for the purpose.
                      (Ministry’s F.No.B-11/3/98 TRU dt.07.10.1998)
iii. The security agencies merely supplying labour and man power
for any purposes other than providing security services are not
liable for Service Tax, irrespective of the fact that they may get
covered as Man power Recruitment Agency.
                                                                     66


iv. The Security agencies during the course of their business
undertake services of collection of dues from loanees, credit
cardholders etc. Such services are not liable for Service Tax.
      (Ref: Service Tax Through Questions & Answers, 2000-2001)




                 CREDIT RATING AGENCIES

Date of Introduction: 16.10.1998 vide Notification No.53/98-ST
                         dt. 07.10.1998
Definition:
      “Credit rating agency” means any commercial concern
engaged in the business of credit rating of any debt obligation or of
any project or progr amme requiring finance, whether in the form
of debt or otherwise, and includes credit rating of any financial
obligation, instrument of security, which has the purpose of
providing a potential investor or any other person any information
pertaining to the relative safety of timely payment of interest or
principal.
                     (Section 65(21) of Finance Act, 1994 as amended)
Taxable events and scope of service:
      Taxable service provided to a client, by a credit rating agency
in relation to credit rating of any financial obligation, instrument or
security.
                  (Section 65(72)(x) of Finance Act, 1994 as amended)
      The credit rating agencies operating in India are registered
with the Reserve Bank of India. These agencies provide among
others ratings in respect of corporate bonds, commercial paper,
                                                                      67


fixed deposits, municipal debt, infrastructure bond, utilities, asset
backed securities, structured obligations, toll road bonds, mutual
funds, etc. All public issues of debt are statutorily required to be
rated. These ratings help individual and institutional investors
frame their investment policies based on benchmark ratings.
      The relevant date for determining the Service Tax liability
would be the date when rating has been assigned to a particular
instrument. In the case of ongoing projects, where rating has been
assigned after the notified date i.e. 16th October, 1998, the Service
Tax would be payable.
                    (Ministry’s F.No.B-11/3/98-TRU dt.07.10.1998)

Value of Taxable Service:

      Value of taxable service shall be the gross amount charged by
the service provider for such service rendered by him.
                           (Section 67 Finance Act, 1994 as amended)
      The client wanting to get rated a debt issue being floated by it
requires the services of a credit rating agency. For this purpose they
enter into a written agreement with a Credit rating Agency in a
standardized format. The agreement specifies the charges for such
rating services as well as for regular surveillance on the existing
rating, to see whether it needs to be revised or otherwise. The fees
of the rating agency are generally expressed as a percentage of the
amount of debt sought to be raised. The fees on any assignments
are usually paid at the time of entering into an agreement i.e. in
advance. Such amounts are kept as advance against rating fee and is
recognized as income only when the rating is assigned. After the
rating is given, it is communicated to the client. The rating of any
instrument remains under surveillance until the entire debt is
repaid. The surveillance is a mandatory exercise for rating agencies.
After surveillance, the client is billed as per the agreed fee structure.
Service Tax is payable both on the fee received for credit rating of
the debt instrument and the surveillance fee.
                                                                     68


      The amount received in advance for the service of rating to be
provided to the client, is only an advance and the services can only
deemed to have been provided only when the rating exercise has
been completed and when rating of any instrument has been
assigned. In case rating is not done, for any reason and the entire
amount is returned back to the client, it cannot be said that services
have been rendered and hence Service Tax is not attracted.
                    (Ministry’s F.No.B-11/3/98-TRU dt. 07.10.1998)

Exemption and Exclusion:

      The information and advisory services, if any, rendered by
credit rating agencies would not attract Service Tax for the reason
that taxable services in respect of credit rating agency means service
provided to a client only in relation to credit rating of any financial
obligation, instrument or security. Services of research and
information such as analysis of industries in specific sectors of
financial and business aspects of a company, other customized
services on say business houses and capital markets, indexing
services and information services such as privatization policy for
infrastructure projects, macro studies of infra-structure sector,
implication of government policy in respect of any sector, financial
modeling, bid evaluation, power purchase agreement, restructuring
of state electricity boards, etc are not services 'in relation to' the
credit rating of any financial obligation, instrument or security and
are hence outside the gamut of service as on the services of credit
ratings.          (Ministry’s F.No.B-11/3/98-TRU dt.07.10.1998)
69
                                                                    70


                MARKET RESEARCH AGENCY

Date of Introduction: 16.10.1998 vide Notification No.53/98-ST
                        dt. 07.10.1998.
Definition:
      “Market research agency” means a commercial concern
engaged in conducting market research in any manner, in relation
to any product, service or utility, including all types of customized
and syndicated research services. (Section 65(41) of Finance Act,
1994 as amended)
      Market research includes research based services in respect of
consumer markets, industrial marketing, business to business
marketing, social and rural marketing, etc. and is based on the
requirements of the client. Such research services may be carried
out by various techniques and may take the form of brand and
advertising research. Such market research services include studies
such as, strategic research & brand positioning development, new
product development research, creating development research,
brand name, logo, pack label research, corporate image, diagnostic
market resear ch, customer research, etc. Therefore, the market
research services are of a very diverse nature and of a very wide
variety. (Ministry’s F.No.B-11/3/98 TRU dt. 07.10.1998)

Taxable events and scope of service:
      Taxable service means any service provided to a client, by a
market research agency in relation to market research of any
product, service or utility, in any manner.
                   (Section 65(72)(y) of Finance Act, 1994 as amended)
      Market research agency providing the service to the
advertising agencies, who have commissioned its services on behalf
of the client, required paying Service Tax on services rendered by it
to an advertising agency. The advertising agency would also liable
to pay Service Tax on the amount billed to its client, but for
advertising ser vices.
                                                                  71


      The Service Tax is payable on all taxable services rendered in
India, whether to an Indian or foreign client.
                   (Ministry’s F.No.B-11/3/98-TRU dt. 07.10.1998)




Value of Taxable Service:
      Value of the taxable service shall be the gross amount charged
by such agency for services rendered in connection with market
research of any product, service or utility in any manner.
                        (Section 67 of Finance Act, 1994 as amended)
Exemption and Exclusion:
1.    Out of pocket expenses which are reimbursable on actual
basis, such as travelling, Boarding and Lodging expenses are not
includible in the value for levy of Service Tax. The assessee is
required to produce documentary evidence for the purpose.
                    (Ministry’s F.No.B-11/3/98 TRU dt. 07.10.1998)
                                                                    72




                 UNDER WRITING SERVICE

Date of Introduction: 16/10/1998 vide Notification No.53/98-ST
                         dt.07.10.1998.
Definition:
      “Underwriter” has the meaning assigned to it in clause (f) of
rule 2 of the Security and Exchange Board of India (Underwriters)
rules, 1993.
                     (Section 65(79) of Finance Act.1994 as amended)
      As per rule 2 (f) of Securities Exchange Board of India
(Underwriters) Rules, 1993, the underwriter means a person who
engages in the business of underwriting of an issue of securities of a
body corporate.
      “Underwriting” has the meaning assigned to it in clause (g) of
rule 2 of the Security and Exchange Board of India (Underwriters)
rules, 1993.           (Section 65(80) of Finance Act.1994 as
amended)
      As per clause (g) of Section 2 of Securities Exchange Board of
India (Underwriters) Rules, 1993, underwriting means the
agreement with or without condition to subscribe to the securities
of a body corporate when the existing shareholders of body
corporate or the public do not subscribe to the securities offered to
them.

Taxable events and scope of service:
                                                                   73




      Taxable service means any service provided to a client, by an
underwriter in relation to underwriting, in any manner.
                  (Section 65(72)(z) of Finance Act.1994 as amended)
      Underwriting services can be provided by financial
institutions, banks, share brokers who are member of stock
exchange and investment / companies / trusts with adequate
financial capacity, appropriate standing and experience. However,
as per Rule 3 of the Securities and Exchange Board of Indian
(Underwriter) Rules, 1993 no person can act as underwriter unless
he holds a certificate granted by the SEBI under the Securities and
Exchange Board of India (Underwriters) Regulations, 1993, and
underwriter is required to enter into a valid agreement with the
body corporate on whose behalf he is acting as an underwriter and
the said agreement amongst other things may define the allocation
of duties and responsibilities between him and such body corporate.
      The companies who are lead Manager and undertake the
activity of underwriting of the issues are covered by Service Tax
Act and they are require to pay Service Tax.
                     (Ministry’s F.No.B-11/3/98-TRU dt.07.10.1998)

Value of Taxable Service:

     Value of taxable service in relation to the service provided by
an underwriter to a client, shall be the gross amount charged by
such underwriter from the client for services rendered in relation to
underwriting in any manner”.
                       (Section 67 of Finance Act, 1994 as amended)
     As per regulation 14 of the SEBI (Underwriters) Regulation,
1993 the agreement between the Underwriter and the body
corporate shall also provide for the amount of commission or
brokerage payable to the underwriter. Service Tax is required to be
paid by the underwriter at the rate of 5% on such commission or
brokerage paid to him for the services of underwriting rendered by
him. The underwriting commission varies depending upon the
                                                                  74


category of underwriter whether a financial institution or otherwise
and also on the amount/s devolving on the public and those
devolving on the underwriters. However the maximum
underwriting commission applicable is notified by the Banking
Department of the Ministry of Finance, though, lower rates of
underwriting commission can also be negotiated between the
underwriter and the client.
                   (Ministry’s F.No.B-11/3/98-TRU dt.07.10.1998)
                                                                      75


     SCIENTIFIC AND TECHNICAL CONSULTANCY

Date of Introduction: 16.07.2001 vide Notification No.4/2001-ST
                        dt.09.07.2001
Definition:
     Section 65(60) defines “scientific and technical consultancy” as
any advice, consultancy, or scientific or technical assistance,
rendered in any manner, by a scientist or a technocrat, or any
science or technology institution or organization, to a client, in one
or more discipline of science or technology.

Taxable events and scope of service:

        The taxable service has been defined in clause 72 (za) of
section 65 as “any service provided, to a client, by a scientist or a
technocrat, or any science and technology institution or
organization, in relation to scientific or technical consultancy”.
    The taxable service should be understood in the context of its
commonly understood meaning and scope. For instance, it would
cover consultation, advice or technical assistance provided by a
scientist or a technocrat or a science or technology institution on
any issue relating to any branch of science and technology. Such
consultation may be in the nature of an expert opinion/advice in
regard to scientific or technical feasibility or any other scientific or
technical aspect of a project, process or design, recommending an
apt technology, suggestion for improvement in existing technology
or process, providing consultation on any technical problem or
about new technology, etc.
      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 and 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.
                                                                     76


     Scientific or technical consultancy is provided to a
government department/public sector undertaking for which
consultation fees are received, then Service Tax would be applicable.
                  (Ministry’s F.No.B-11/1/2001-TRU dt. 09.07.2001)

Value of Taxable Service:

      Value of Taxable service shall be the gross amount charged by
the service provider for such service rendered by him.
                        (Section 67 of Finance Act, 1994 as amended)

Exemption and Exclusion:
  1. Services rendered by doctors, medical colleges, nursing homes,
     hospitals, diagnostic and pathological labs, etc. would not
     come under the purview of levy of Service Tax as in common
     parlance, these categories of service providers are not known
     as scientists or technocrats or science or technology
     institutions or organizations.
  2. 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.
  3. Public funded research institutions, which receive grants or
     aids from the Government for conducting research /project
     works are not covered under the purview of Service Tax as no
     service is rendered to any one. However, if they render service
     to anyone on payment basis, Service Tax will be payable on
     such services.
                  (Ministry’s F.No.B -11/1/2001-TRU dt. 09.07.2001)
                                                                 77




                 PHOTOGRAPHY SERVICE

Date of introduction: 16.07.2001 vide Notification No.4/2001 -ST
                     dt.09.07.2001
Definition:
     “Photography” includes still photography, motion picture
photography, laser photography, aerial photography and
fluorescent photography.           (Section 65(47) of Finance Act,
1994 as amended)

     “Photography studio or agency” means any professional
photographer or a commercial concern engaged in the business of
rendering service relating to photography.
                   (Section 65(48) of Finance Act, 1994 as amended)

Taxable event & Scope service:

     Taxable service means any service provided to a customer, by
photography studio or agency in relation to photography, in any
manner.
     The services which will come within the purview of Service
Tax are still photography such as photographing persons or other
subjects in studios or other locations, passport or identification
photographs, fashion photos; industrial photographs of machine
and buildings etc; photographic service for advertising display,
                                                                     78


brochures, news paper advertisement, catalogues; photography of
any live event such as weddings, receptions, conventions, fashion
shows, sports and news events (excluding news agency services, that
is, press photographers are excluded); aerial photography such as
photographs of landscape, structures and other surfaces from
aircraft or helicopters with the help of cameras mounted on such
aircraft or helicopter; laser photography to create holograms;
motion picture photography, also known as cinematography to
make films, which involves the general composition of a scene; the
lighting of the set or location; the choice of cameras, lenses, filters,
and film stock; the camera angle and movements; and the
integration of any special effects; fluorescence photography using
ultraviolet rays to irradiate a surface or substance to identify dyes,
stains, and markings, specific chemical substances, and fluorescent
components in microscope specimens; and any other kind of special
photography service. Also covered are the photography services
such as restoration of old photographs, processing and developing
of photographic films and printing of photographs etc.
      The photography services are rendered by still photography
studios, still film processing laboratories, cinematographic
studios/labs who undertake motion picture photography and
processing of cin e films, holography studios (laser photography)
who make holograms, aerial photographers, industrial
photographers, etc.
                   (Ministry’s F.No.B11/1/2201-TRU dt. 09.07.2001)

Value of Taxable service:

      The value of taxable service shall be the gross amount charged
by the service provider for such service rendered by him but dose
not include the cost of unexposed photography film sold to the
client during the course of providing service.
                       (Section 67 of Finance Act, 1994 as amended)
The service provider claiming benefit of the cost of film should be
advised to show them directly on the invoices alongwith description
                                                                   79


and particulars of the film, otherwise the claim will not be consider
as admissible. No other cost (such as photographic paper, chemicals
etc.) is excluded from the taxable value.

Exemption and Exclusion:

      Service provided to a customer in relation to still photography
by a photography studio or agency, which is not registered under
the law relating to Shops & Establishment or any other law of a
State for the time being enforced from the whole of the Service Tax
leviable thereon under section 66 of the Finance Act, 1994, vide
Notification No.6/2001-ST dt.09.07.2001.
      Accordingly, service providers who are registered under
various States/Municipal laws relating to Shops and Establishments
or any other law of State which is in force for the time being, for
carrying out commercial activity only are liable to Service Tax.
                   (Ministry’s F.No.B11/1/2001-TRU dt.09.07.2001)



                  CONVENTION SERVICES

Date of Introduction: 16.7.2001 vide Notification No.4/2001-ST
                       dt.09.07.2001.
Definition:
     As per section 65(19), “convention” has been defined to mean
a formal meeting or assembly which is not open to the general
public, and does not include a meeting or assembly the principal
purpose of which is to provide any type of amusement,
entertainment or recreation.
Taxable events and scope of service:
     As per section 65(72) (zc), the taxable service is any service
provided, to a customer, by a commercial concern in relation to
holding of a convention.
                                                                   80


       Any service provided for holding a conference, seminar,
meetings etc by a commercial concern will come under the tax net.
The service could be in the nature of providing of room/ hall for
the convention. The services could also include providing other
facilities such as video conferencing, equipment such as overhead
projectors, video-roma (LCD projector), speakers, microphones,
technical staff for operating these equipments and stationery, etc
apart from providing space for holding a convention. The charges
for such facilities shall also be included in the value of taxable
service.
       In some cases it may appear that it is same as the service
rendered by a “mandap keeper”. Apart from the fact that there is a
subtle distinction between the type of events (official, social or
business function in the case of mandap keeper as opposed to formal
meeting in the case of convention services) it is clarified that the
intention is not to charge the Service Tax twice on the same service.
If a service provider is already registered as a mandap keeper and
paying Service Tax, 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.
       (Ministry’s F.No.B-11/1/2001 TRU dt.09.07.2001 as amended)




Value of Taxable Service: -
      Value of Taxable service shall be the gross amount charged by
the service provider for such service rendered by him.
                         (Section 67 of Finance Act 1994 as amended)

Exemption and Exclusion:
1.   The 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
                                                             81


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.
     (Ministry’s F.No.B-11/1/2001 TRU dt.09.07.2001 as amended)




                         TELEX SERVICE

Date of Introduction: 16.07.2001 vide Notification No.4/2001-ST
                     dt.09.07.2001.
                                                                     82


Definition:

      “Telex” means a typed communication by using teleprinters
through telex exchanges.
                     (Section 65(75) of Finance Act, 1994 as amended)
      “Telegraph Authority” has the meaning assigned to it in clause
(6) of Section 3 of the Indian Telegraph Act, 1885 (13 of 1885) and
includes a person who has been granted a license under the first
proviso to sub-section (1) of Section 4 of that Act.
                    (Section 65(74) of Finance Act, 1994 as amended)
      As per Section 3(6) of Indian Telegraph Act, 1885, “Telegraph
Authority” means the Director General of Posts and Telegraphs
and including any officer empowered by him to perform all or any
of the functions of the Telegraph authority under this Act.

Taxable events and scope of service:

      Taxable service in relation to telex means service provided to a
subscriber, by the telegraph authority in relation to a
communication through telex.            (Section 65(72) (zf) of Finance
Act, 1994 as amended)


Value of the Taxable Service:

     The value of the taxable service shall be the gross amount
charged by the service provider for such service rendered by him
includes the adjustments made by the telegraph authority from any
deposits made by the subscriber at the time of application for Telex
but dose not include initial deposit made by subscriber at the time
of application for Telex.
                       (Section 67 of Finance Act, 1994 as amended)
                                                                    83


                     TELEGRAPH SERVICE

Date of Introduction: 16.07.2001 vide Notification No.4/2001-ST
                    dt.09.07.2001.

Definition:

      “Telegraph” has the meaning assigned to it in clause (1) of
section 3 of Indian Telegraph Act, 1885.
                    (Section 65(73) of Finance Act, 1994 as amended)

      As per Section 3 (1) of Indian Telegraph Act, 1885, “
Telegraph” means any appliance, instrument, material or apparatus
used or capable of sue of transmission or reception of signs, signals,
writing, images, and sounds or intelligence of any nature by wire,
visual or other electro-magnetic emissions, radio waves or Hertzian
waves, galvanic, electric or magnetic means.

      “Telegraph Authority” has the meaning assigned to it in clause
(6) of Section 3 of the Indian Telegraph Act, 1885 (13 of 1885) and
includes a person who has been granted a license under the first
proviso to sub-section (1) of Section 4 of that Act.
                    (Section 65(74) of Finance Act, 1994 as amended)

      As per Section 3(6) of Indian Telegraph Act, 1885, “Telegraph
Authority” means the director General of Posts and Telegraphs and
including any officer empowered by him to perform all or nay of
the functions of the Telegraph authority under this Act.

Taxable events and scope of service:

      Any service provided to a subscriber by telegraph authority in
relation to a communication through telegraph.
                (Section 65(72) (ze) of Finance Act, 1994 as amended)
                                                                  84




Value of the Taxable Service:

      The value of the taxable service shall be the gross amount
                                  o
charged by the service provider f r such service rendered by him
includes the adjustments made by the telegraph authority from any
deposits made by the subscriber at the time of application for
Telegraph but dose not include initial deposit made by subscriber at
the time of application for Telegraph.                  (Section 67
Finance Act, 1994 as amended)
                                                                   85


                     FASCIMILE SERVICE

Date of Introduction: 16.07.2001 vide Notification No.4/2001-ST
                     dt.09.07.2001.

Definition:

      “Facsimile”(FAX) means a form of telecommunication by
which fixed graphic images, such as printed texts and pictures are
scanned and the information converted into electrical signals for
transmission over the telecommunication system.
                    (Section 65(25) of Finance Act, 1994 as amended)
      “Telegraph Authority” has the meaning assigned to it in clause
(6) of Section 3 of the Indian Telegraph Act, 1885 (13 of 1885) and
includes a person who has been granted a license under the first
proviso to sub-section (1) of Section 4 of that Act.
                    (Section 65(74) of Finance Act, 1994 as amended)
      As per Section 3(6) of Indian Telegraph Act, 1885, “ Telegraph
Authority” means the director General of Posts and Telegraphs and
including any officer empowered by him to perform all or any the
functions of the Telegraph authority under this Act.

Taxable events and scope of service:

      Taxable service means any service provided to a subscriber, by
the telegraph authority in relation to ‘facsimile communications’.
                 (Section 65(72)(zg) of Finance Act, 1994 as amended)
      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 provided by the Dept. of Telecom through post
and telegraph offices. In the second type of facsimile service, the
service charges are equal to the telephone calls consumed and it is
                                                                    86


already covered in the ambit of Service Tax under the category of
telephone connections.
                  (Ministry’s F.No.B11/1/2001-TRU dt.09.07.2001)

Value of the Taxable Service:

      The value of the taxable service shall be the gross amount
charged by the service provider for such service rendered by him
includes the adjustments made by the telegraph authority from any
deposits made by the subscriber at the time of application for
Facsimile but dose not include initial deposit made by subscriber at
the time of ap plication for Facsimile.                  (Section 67
Finance Act, 1994 as amended)

Exemption and Exclusion:

       Service Tax will not be payable in respect of those facsimile
services where service charges are based on the number of telephone
calls consumed. Private fax operators are providing the second kind
of facsimile service and therefore, they are not liable to Service Tax
again.
                   (Ministry’s F.No.B11/1/2001-TRU dt. 09.07.2001)
                                                                    87




                       LEASED CIRCUITS

Date of Introduction: 16.07.2001 vide Notification No.4/2001-ST
                    dt.09.07.2001.

Definition:

      “Leased Circuits” means a dedicated link provided between
two fixed locations for exclusive use of the subscriber and includes a
speech circuit, data circuit or a telegraph circuit.
                     (Section 65(35) of Finance Act, 1994 as amended)
      “Telegraph Authority” has the meaning assigned to it in clause
(6) of Section 3 of the Indian Telegraph Act, 1885 (13 of 1885) and
includes a person who has been granted a license under the first
proviso to sub-section (1) of Section 4 of that Act.
                    (Section 65(74) of Finance Act, 1994 as amended)
      As per Section 3(6) of Indian Telegraph Act, 1885, “Telegraph
Authority” means the director General of Posts and Telegraphs and
including any officer empowered by him to perform all or nay of
the functions of the Telegraph authority under this Act.

Taxable events and scope of service:

      Taxable service means any service provided to a subscriber, by
the telegraph authority in relation to ‘leased circuits’.
                (Section 65(72)(zd) of Finance Act, 1994 as amended)
                                                                  88


      The Service Tax on the ‘leased circuits’ service shall be
collected in the same manner as applicable to Telephone Services.
                   (Ministry’s F.No.B11/1/2001-TRU dt.09.07.2001)

Value of the Taxable Service:

      The value of the taxable service shall be the gross amount
charged by the service provider for such service rendered by him
includes the adjustments made by the telegraph authority from any
deposits made by the subscriber at the time of application for lease
circuits but dose not include initial deposit made by subscriber at
the time of application for lease circuits.             (Section 67
Finance Act, 1994 as amended)
          ON-LINE INFORMATION AND DATABASE
                ACCESS AND/OR RETRIEVAL

Date of Introduction: 16.07.2001vide Notification No.4/2001-ST
                        dt.09.07.2001.
Definition:
     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 assigned to
them in the Information Technology Act, 2000.
      The definitions given in the Information Technology Act,
2000 are as follows:-
      “Data” means a representation of information, knowledge,
facts, concepts or instructions which are being prepared or have
been prepared in a formalized manner, and is intended to be
processed, is being processed or has been processed in a computer
system or computer network, and may be in any form (including
computer printouts, magnetic or optical storage media, punched
cards, punched tapes) or stored internally in the memory of a
computer.
                                                                     89


       “Information” includes data, text, images, sound voice, codes,
computer programmes, software and data bases or micro film or
computer generated micro fiche.
       “Electronic form” with reference to information means any
information generated, sent, received or stored in media, magnetic,
optical computer memory, microfilm, computer generated
microfiche or similar device.
       “Computer network” means the interconnection of one or
more computers through-
   (i) the use of satellite, microwave, terrestrial line or other
   communication media; and
   (ii) terminals or a complex consisting of two or more
   interconnected computers whether or nor the interconnection is
   continuously maintained.



Taxable events and scope of service:
      As per section 65(72) (zh), taxable service means any service
provided to a customer, by a commercial concern, in relation to on-
line information and database access or retrieval or both in
electronic form.
      In the context of this service, it may be relevant to point out
the manner in which on-line information and database
access/retrieval is generally made available. First, function is that of
what is commonly known as Internet Service Providers (ISPs). The
ISPs provide telecommunication network or gateways necessary to
access messages and databases and other information holdings of
content providers. The second element is on-line information
provision services which includes database services, provision of
information on web-sites, provision of on-line data retrieval services
from data bases and other information, to all or limited number of
users and provision of on-line information by content providers.
Internet service providers (ISPs) provide access to the web-sites
through the computer network and the web-sites. Web-sites, in
                                                                     90


turn, provide the database 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-sum 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.
      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.
                  (Ministry’s F.No.B-11/1/2001-TRU dt.09.07.2001)




Value of Taxable Service:

     The value of Taxable service shall be the gross amount charged
by the service provider for such service rendered by him.
                        (Section 67 of Finance Act, 1994 as amended)

Exemption and Exclusion:

     In e-commerce transactions, no service of online     information
and database access/retrieval is involved. Therefore,      e-commerce
transactions will not ordinarily be covered under the     Service Tax
net. Normally, the web sites do not charge the              surfers for
                                                                 91


information on sale of goods or services offered by them. If at all
they do, Service Tax will be payable on the amount charged for
providing the information.
1.   The inter-connectivity services provided by one ISP to
another and charges recovered for such services are not liable to
Service Tax.
2.   The cyber cafés provide only the infrastructure such as
computer terminals and internet connection. It is the ISP or
websites who provide on-line access or retrieval of information.
Therefore, cyber cafés are not liable to pay Service Tax. Services
provided by ISP to cyber café are taxable and the ISP will pay the
tax on charges realized from the cyber cafe.
                 (Ministry’s F.No.B-11/1/2001 TRU dtd.9.7.2001)
                                                                     92


            VIDEOTAPE PRODUCTION SERVICE

Date of introduction: 16.07.2001 vide Notification No.4/2001-ST
                     dt.09.07.2001

Definition:
     “Video production agency” means any professional
videographer or any commercial concern engaged in the business of
rendering services relating to video-tape production;
                    (Section 65(82) of Finance Act, 1994 as amended)
     “Video-tape production” means the process of any recording
of any programme, event or function on a magnetic tape and
includes editing thereof, in any manner;
                    (Section 65(83) of Finance Act, 1994 as amended)

Taxable event & Scope of service:
       Taxable service means any service provided to a client, by a
video production agency in relation to videotape production, in any
manner.
                  (Section 65(72) (zi) of Finance Act, 1994 as amended)
                                                                    T
he taxable service covers the service of recording of any programme,
event or function and includes recording of serials, telefilms or any
other programme meant for broadcasting. Also, the scope of taxable
service covers any service in relation to videotape production in any
manner. Thus facilitation activities, such as providing studio, other
facility as lights, gadgets, instruments, devices, providing technical
persons for operating the recording devices or for any other activity
in relation to video tape production are taxable. Similarly, editing,
colouring, dubbing, printing titles and special effects, film
processing etc by a video production agency will all come within
the scope of this service .
                    (Ministry’s F.No.B11/1/2001-TRU dt. 09.07.2001)

Value of Taxable Service:
                                                                  93


     Value of the taxable service shall be the gross amount charged
by the service provider or such service rendered by him but dose
not include the cost of unrecorded magnetic tape or such other
storage devices, if any, sold to the client during the course of
providing the service.                   (Section 67 of Finance Act,
1994 as amended)
Exemption and Exclusion:

1.    The taxable service provided to a client by an individual
professional videographer in relation to videotape production is
exempted from the whole of the Service Tax, vide Notification No.
7/2001-ST dt.09.07.2001. As such the tax is payable by studios,
shops and other establishment carrying on business of rendering
service in the field of videography.
2.    Reproduction of original master to make further copies of a
videotape will not come within the purview of Service Tax.
                    (Ministry’s F.No.B11/1/2001-TRU dt. 09.07.2001)
                                                                     94




                SOUND RECORDING SERVICE
Date of introduction: 16.07.2001 vide Notification No.4/2001-ST
                         dt.09.07.2001
Definition:
      “Sound recording” means recording of sound on a magnetic
storage device and editing thereof, in any manner.
                     (Section 65(66) of Finance Act, 1994 as amended)
      “Sound recording studio or agency” means any commercial
concern engaged in the business of rendering any service relating to
sound re-recording;         (Section 65(67) of Finance Act, 1994 as
amended)
Taxable event & Scope of service:
      Taxable service means any service provided to a client, by a
sound recording studio or agency in relation to any kind of sound
recording.
                (Section 65(72) (zj) of Finance Act, 1994 as amended)
      Any service provided by sound recording studio or agency in
relation to recording of sound will be covered under the tax net.
The activities which fall under the category of service are providing
the facility of studio, technical persons, musical instruments and
other devices or any other facility 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 theatre, films and radio etc. services for mixing of sounds,
etc. The service charges that are paid for the use of these facilities
                                                                   95


and it is usually in terms of hours of usage.       (Ministry’s
F.No.B11/1/2001 -TRU dt.09.07.2001)

Value of taxable service:
      The value of taxable service shall be the gross amount charged
by the service provider for such service rendered by him but dose
not include cost of unrecorded magnetic tape or such other storage
devices if any, sold to the client during the course of providing the
service.
                        (Section 67 of Finance Act, 1994 as amended)
Exemption and Exclusion:

     Reproduction of original master to make further copies of the
audiotape or CDs etc. will not come within the purview of Service
Tax.
                (Ministry’s F.No.B11/1/2001-TRU dt.09.07.2001)


                   BROADCASTING SERVICE

Date of Introduction: 16.7.2001 vide Notification No.4/2001-ST
                       dt.09.07.2001.
Definition:
      “Broadcasting” has the meaning assigned to it in clause (c) of
section 2 of the Prasar Bharati (Broadcasting Corporation of India)
Act, 1990 (25 of 1990). (Section 65(13) of Finance Act, 1994 as
amended)
      As per clause (c) of section 2 of the Prasar Bharati
(Broadcasting Corporation of India) Act, 1990 (25 of 1990),
“broadcasting” means the dissemination of any form of
communication like sign, signals, writing, pictures, images and
sound of all kind by transmission of ele ctro-magnetic waves
through space or through cables intended to be received by the
general public either directly or indirectly through the medium of
                                                                    96


relay stations and all is grammatical variations and cognate
expressions shall be construed accordingly.

Taxable events and scope of service:

      Taxable service means any service provided to a client, by a
broadcasting agency or organization in relation to broadcasting, in
any manner.       (Section 65(72) (zk) of Finance, Act 1994 as
amended)
      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,     news,
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.
      In case of foreign satellite TV channels, their head office may
be located outside India. However, they have their branch offices or
subsidiary companies located in India. In some cases, they have
appointed      agents.    These       branch    offices/    subsidiary
companies/agents act on behalf of these channels, selling time slots
and recovering service 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.
      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,
                                                                   97


therefore, registered for payment of Service Tax and for complying
with other procedural formalities.
      Under section 22 of the Prashar Bharati Act 1990, Prasar
Bharati (AIR & Doordarshan) are exempt only in respect of direct
tax and not in respect of indirect tax. As such AIR or Doordarshan
are liable to pay Service Tax.    (Ministry’s    F.No.B-11/1/2001-
TRU dt.09.07.2001)

Value of Taxable Service:

      The value of taxable service shall be the gross amount charged
by the service provider for such service rendered by him.
                         (Section 67 of Finance Act, 1994 as amended)
      Broadcasting service is provided by selling time slots. In the
case of advertisements, service charges are recovered based on the
duration and frequency of advertisement and the time slot (prime
time, non-prime time etc.) provided for the advertisement. In the
case of serials/programmes/ events, service charges are made on the
basis of factors such as duration, time slot, etc. However, some free
commercial time is provided to the sponsor, which he can sell the
same to others. In the case of broadcasting service, the
advertisement charges or the sponsorship charges received by the
broadcasting agency or organization are the consideration for the
services rendered and Service Tax is pay able on these charges.
                   (Ministry’s F.No.B-11/1/2001-TRU dt.09.07.2001)




Exemption and Exclusion:
      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 earth stations located in
                                                                    98


India or through other agencies located abroad. The up-linking
agencies are not broadcasting agencies and are not liable to Service
Tax in respect of such service. The signals beamed by satellite are
received either by Multi System Operators (MSO) or directly by
cable operators. In the latter case the cable operator further
retransmits the signals to the public (viewers). However, in the case
of MSO, they first retransmit signals to the cable operator who in
turn retransmits the same to the viewers. The cable TV operator
who merely retransmits the programme is not a broadcasting
agency or organization with respect to such retransmitted
programmes. The MSO also is not a broadcasting agency to the
extent he merely retransmits signals. However in case the MSO
operates a local cable channel such as Spectranet, Siticable, Incable,
Sumangali, etc. and broadcasts a programme or serial or
advertisement on his own, he would be liable to pay Service Tax on
the amount he charges for the service rendered to his clients in
relation to broadcasting of such programmes. It may be noted that
there may be instances when cable TV operators themselves
undertake to broadcast advertisements. Cable television operators
have, however, been exempted from the levy of Service Tax vide
notification No. 8/2001-ST dt.09.07.2001.
                  (Ministry’s F.No.B-11/1/2001-TRU dt.09.07.2001)
Other issues :
       Since beginning, the service tax on broadcasting services has
become a subject matter of litigations and representations.
Government run broadcasting service providers like AIR,
Doordarshan are yet to get registered under the tax net.
        Secondly, certain amendments are made in the definition of
“broadcasting” and “taxable service in relation to broadcasting” and
“Broadcasting agency and organisation ” with retrospective effect
from 16/7/2001 . These amendments have been made to clarify the
scope and applicability of service and to remove doubts/difficulties
in implementing the levy of service tax on broadcasting service.
                                (Clause 141 of the Finance Bill, 2002)
                                                                    99


             INSURANCE AUXILIARY SERVICE

Date of Introduction: 16.7.2001 vide Notification No.4/2001-ST
                          dt.09.07.2001.
Definition:
      As per section 65(31), “insurance auxiliary service” means any
service provided by an actuary, an intermediary or insurance
intermediary or an insurance agent in relation to general insurance
business and includes risk assessment, claim settlement, survey and
loss assessment.
Taxable event and scope of service:
     Taxable service means any service provided to a policyholder or
insurer by an actuary or intermediary or insurance intermediary or
insurance agent, in relation to insurance auxiliary service.
                 (Section 65(72) (zl) of Finance Act, 1994 as amended)
      “Actuary” has a meaning assigned to it in clause (1) of section
2 of Insurance Act, 1938 (4 of 1938).
                      (Section 65(1) of Finance Act, 1994 as amended)
      “Intermediary or Insurance Intermediary” has the meaning
assigned to it in sub clause (f) of clause (1) of section 2 of the
Insurance Regulatory and Development Authority Act, 1999 (41 of
1999).
                     (Section 65(32) of Finance Act, 1994 as amended)
      “Insurance Agent” has the meaning assigned to it in clause (10)
of section 2 of the Insurance Act, 1938 (4 of 1938).
                     (Section 65(30) of Finance Act, 1994 as amended)
      “Insurer” means any person carrying on the General Insurance
Business in India.           (Section 65(33) of Finance Act, 1994 as
amended)
      “General Insurance Business” has the meaning assigned to it in
clause (g) of Section 3 of the General Insurance Business
(Nationalisation) Act, 1972 (57 of 1972).
                     (Section 65(27) of Finance Act, 1994 as amended)
      Services covered in this category are the services provided by
the insurance agents to the insurance company in relation to
                                                                  100


marketing of insurance policies. They also provide service to the
policyholder by providing information/advice on the types of
insurance policies, processing of documentation, remitting of
insurance premium, etc. Actuarial services are provided by the
actuaries to the insurance companies. They cover diverse fields such
as calculating insurance risks and premia, insurance claims
adjustment services such as service s of investigating claims,
determining the amount of loss or damages covered by the
insurance policies and negotiating settlements, services of examining
claims which have been investigated and authorisation of payments
and damage assessment services, administration of insurance
including salvage administration and insurance consultancy services.
It may be emphasized that only such services are taxable which are
in relation to general insurance business such as motor vehicle
insurance, insurance of buildings and other properties, marine
insurance, fire insurance and other miscellaneous insurance. Services
provided in relation to life insurance are not taxable.
      The service providers are insurance agents, insurance
surveyors and loss adjusters, actuaries and insurance consultants. In
the case of insurance surveyors and loss adjusters, actuaries and
insurance consultants, the service is provided mainly to the
insurance companies (insurer) while in the case of insurance agents,
the service is provided to both the insurer and the policy holder.
Service Tax is liable to be paid by the insurance auxiliary service
provider except in case of insurance agents. Insurance agents
normally do not charge the policyholder. 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.              (Ministry’s             F.No.B-11/1/2001-TRU
dt.09.07.2001)

Taxable Value:
                                                                  101




      Value of taxable service shall be the gross amount charged by
the service provider for such service rendered by him, includes the
commission, fee or any other sum received by actuary or
intermediary or insurance intermediary or insurance agent from
insurer.
                         (Section 67 of Finance Act, 1994 as amended)
      Rule 6 of the Service Tax Rules, 1994, provides for payment of
Service Tax only on the amount received and not on the amount
raised for the services provided. As such Service Tax is payable only
on the amount actually received.
                   (Ministry’s F.No.B-11/1/2001-TRU dt.09.07.2001)

Exemption and Exclusion:

1.    Pocket expenses, which ar e reimbursable on actual basis, such
     as travelling, Boarding and Lodging expenses, are not subjected
     to Service Tax subject to production of documentary evidence
     in this respect.
2.    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.
                   (Ministry’s F.No.B-11/1/2001 TRU dt.09.07.2001)
                                                                     102




 INSURANCE AUXILIARY SERVICE RELATING TO LIFE
                 INSURANCE

Date of Introduction : 16-08-2002 vide Notification No. 8/2002 dt.
01.08.2002.

Definitions:
  (a) “Insurance auxiliary service” means any service provided by an
      actuary, an intermediary or insurance intermediary or an
      insurance agent in relation to general insurance business or life
      insurance business and includes risk assessment, claim
      settlement, survey and loss assessment; ( Section 65(46) of
      Finance Act 1944 as amended)
  (b)“Insurance agent” has the meaning assigned to it in clause (10)
      of     Section 2 of the Insurance Act, 1938; ( Section 65(45) of
      Finance Act 1944 as amended)
  (c) “Intermediary or insurance intermediary’ has the meaning
      assigned to it in sub-clause (f) of clause (1) of Section 2 of the
      Insurance Regulatory and Development Authority Act, 1999;
      ( Section 65(47) of Finance Act 1944 as amended)
                                                                    103


  (d)“Insurer” means any person carrying on the general insurance
      business or life insurance business in India; ( Section 65(48) of
      Finance Act 1944 as amended)
  (e) “Policy holder” has the meaning assigned to it in clause (2) of
      Section 2 of the Insurance Act, 1938; ( Section 65(65) of
      Finance Act 1944 as amended)
  (f) “Life insurance business” has the meaning assigned to it in
      clause (11) of Section 2 of the Insurance Act, 1938. ( Section
      65(51) of Finance Act 1944 as amended)

Taxable event & Scope of service:
    Taxable service means any service provided to a policyholder,
by an insurer carrying on life insurance business in relation to life
insurance business. Though the service is provided by the life
insurance agents, service tax is not payable by them, but by the
insurance companies. Tax is payable in respect of old policies also.
(Section 65(90)(zx) of Finance Act 1944 as amended).


Value of taxable service:
      Value of taxable service shall be the gross amount charged by
the service provider for such service rendered by him

Exemption and Exclusion:
      It has been decided to exempt the service tax leviable on life
insurance business ( refer Notification No 9/2002 ST dated 1-8-
2002) As a result , service tax is not payable on the service provided
by an insurer to a policy holder in relation to life insurance
business.
                                                                104




       BANKING AND OTHER FINANCIAL SERVICES

Date of Introduction: 16.07.2001 vide Notification No.4/2001-ST
                        dt.09.07.2001.
Definition:
     As per section 65(10) of the Finance Act, 1994, “banking and
financial services” means the following services provided by a
banking company or a financial institution including a non banking
financial company, namely :-
     (i) financial leasing services including equipment leasing and
            hire-purchase by a body corporate;
     (ii) credit card services;
                                                                105


     (iii) merchant banking services;
     (iv) securities and foreign exchange (forex) broking;
     (v) asset management including portfolio management, all
           forms of fund management, pension fund management,
           custodial depository and trust services, but does not
           include cash management;
     (vi) advisory and other auxiliary financial services including
           investment and portfolio research and advice, advice on
           mergers and acquisition and advice on corporate
           restructuring and strategy; and
     (vii) provision and transfer of information and data
           processing.

Taxable event and scope of service:
       The taxable service, as per section 65(72)(zm) means any
service provided, to a customer, by a banking company or a
financial institution including a non banking financial company, in
relation to banking and other financial services.
       The definitions of ‘banking’, ‘banking company’, ‘financial
institution’ and ‘non-banking financial company’ as per the Banking
Regulation Act, 1949 and Reserve Bank of India Act, 1934 are given
below:-
       “Banking” means the accepting, for the purpose of lending or
investment, of deposits of money from the public, repayable on
demand or otherwise, and withdrawable by cheque, draft, order or
otherwise.
       “Banking company” means any company which transacts the
business of banking in India.
       “Financial institution” means any non-banking institution,
which carries on as its 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:
                                                                  106


 (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 lump-sum 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 institution, which carries on as its
 principal business-
   (a) agricultural operations; or
    (aa) industrial activity; or
   (b) purchase or sale of any goods (other than securities) or
          providing of any service, or
   (c) the purchase, construction or sale of immovable
          property, so, however, that no portion of the income of
          the institution is derived from the financing of purchases,
          construction or sales of immovable property by other
          persons.
“non-banking financial company “ means-
        (i) a financial institution which is a company;
        (ii) a non banking institution which is a company and
              which has as its principal business the receiving of
              deposits, under any scheme or arrangement or in any
              other manner, or lending in any manner;
                                                                   107


         (iii) such other non-banking institution or class of such
               institutions, as the Bank may, with the previous
               approval of the Central Government and by
               notification in the Official Gazette, specify.

Financial services covered under the tax net are specifically
mentioned in the definition itself.

1.    Financial leasing including equipment leasing and hire
purchase:
1.1 In case of financial leasing including equipment leasing and
hire purchase, the service is taxable only if it is rendered by a body
corporate. The term ‘body corporate’ has the meaning assigned to it
in clause (7) of section 2 of the Companies Act, 1956. Briefly, body
corporate means a private limited, public limited company or a
Government company. Such companies should be either a banking
company or a financial institution or non-banking financial
company to come under the tax net. In other words individuals,
proprietorship firms, partnership firms will not come under tax net.
The leasing or hire purchase may be of motor vehicles, machinery,
equipment or other goods.
1.2 In the case of leasing or hire purchase, it is understood that the
general business practice is as follows: The service provider enters
into a leasing or hire purchase agreement with the lessee or hire-
purchaser. At the time of entering into the agreement, they collect a
charge called lease management fee or processing fee or
documentation charges or by any other name, which is usually a
percentage of the transaction value. The lease rental or hire
purchase amount is recovered in equated monthly instalments
(EMI) over the period of lease or hire-purchase as indicated in the
agreement through post dated cheques and no separate bills are
raised for the monthly recovery. Every agreement bears a unique
number.
1.3 The EMIs consist of recovery of principal amount (towards the
original cost of the equipment) and finance /interest charges. The
                                                                  108


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
are the revenue or income and are 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 the Service Tax in the case of financial leasing
including equipment leasing and hire purchase will be leviable only
on the lease management fee/processing fee/documentation charges
(recovered at the time of entering into the agreement) and on the
finance/interest charges (recovered in equated monthly instalments)
and not on the principal amount.


2 Credit card services
2.1 This is a service where the customer is provided with credit
facility for purchase of goods and services in shops, restaurants,
hotels, railway bookings, petrol pumps, utility bill payments, etc.
Cash advances are also permitted upto specified limits in most of
the cases. This service is provided by nationalized banks, multi-
national banks and private banks.
2.2 For rendering the service, the service provider collects joining
fee, additional card fee, annual fee, replacement card fee, cash
advance fee, charge slip/statement retrieval fee, surcharge/service
charges on railway fare, fuel charges, and utility bill payments,
charges on over limit accounts and late payment fee, interest on
delayed payment, interest on revolving credit, etc. The fees may
vary based on the type of card and from bank to bank. All these
charges, including interest charges are made for the services
                                                                    109


rendered. Hence they all form part of the value of the taxable
service in this case.

3 Merchant banking services
3.1 Banks and Financial institutions including NBFCs providing
merchant banking services are governed by the SEBI (Merchant
Bankers) Rules, 1992 and SEBI (Merchant Bankers) Regulations,
1992. As per these rules and regulations, merchant banking service
is any service provided in relation to issue management either by
making arrangements regarding selling, buying or subscribing
securities 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.

4. Asset management including portfolio management and all
forms of fund management, pension fund management,
custodial depository and trust services.
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 behalf of the client (whether as discretionary
manager or otherwise) the management or the administration of
portfolio of securities or the funds of the client, as the case may be.
They enter in agreement with the client and charge an agreed fee for
providing the service. The tax will be leviable on the fee charged for
                                                                     110


providing these services. Similarly in the case of other types of fund
management such as pension fund management, Service Tax will be
leviable on the fee charged for providing the service.
4.2 Custodial depository services means safe keeping of securities of
a client and providing services incidental thereto, and includes-
   (a) maintaining accounts of securities of a client;
   (b) collecting the benefit of rights accruing to the client in respect
       of the securities;
   (c) keeping the client informed of the action taken or to be taken
       by the issuer of securities, having a bearing on the benefits or
       rights accruing to the client; and
   (d) maintaining & reconciling records of the services referred to
       in sub-clause (a) to (c).
       Taxable value is the fee charged for providing custodial
services. However, Service Tax will not be leviable on NSDL or
CSDL fees paid to the depositories and recovered from the
customers on actual basis.

5.    Other auxiliary financial services
5.1 Some examples of other auxiliary financial services are
investment and portfolio research and advice, advice given on
mergers and acquisition, advice on corporate restructuring and
strategy, market analysis and intelligence.

6.     In the case of banks and financial institutions including
NBFCs, while some services may be do ne in a centralized way (that
is centralized billing and accounting) either at the head office or
regional office, in respect of other services such as financial leasing
including equipment leasing, specified branches may be providing
the service with separate billing and accounting. In respect of a
taxable service, where the billing and accounting is centralized in an
office of the bank, only such office needs to be registered and made
liable to pay Service Tax in respect of such service. Where the
billing and accounting is not centralized and is undertaken by
different branches of a bank or a financial institution including
                                                                    111


NBFCs, each such branch office will have to be registered and made
responsible for payment of Service Tax and compliance with other
procedural formalities.
                  (Ministry’s F.No.B-11/1/2001-TRU dt.09.07.2001)


Value of Taxable Service:

      Value of taxable service shall be the gross amount charged by
the service provider for such service rendered by him.
                        (Section 67 of Finance Act, 1 994 as amended)

Exemption and Exclusion:

  1. In the case of lease or hire-purchase agreements entered into
     prior to the imposition of levy (prior to 16-7-2001) no Service
     Tax will be leviable, provided the property/goods has also
     been received by the lessee prior to 16.7.2001.
  2. In the case of Credit card services, the Service Tax is leviable
     only in respect of transactions, which are done using a credit
     card on or after 16th of July 2001. Any amount paid by a
     customer to credit card service provider in respect of
     transaction done prior to 16th July, 2001 is not liable to Service
     Tax even though such amount is paid on or after the 16 th July,
     2001.
  3. With respect to mutual funds, the asset management
     companies will not come under the purview of Service Tax,
     as they are not NBFC.            (Ministry’s F.No.B-11/1/2001-
     TRU dt.09.07.2001)
                                                                    112




                          PORT SERVICES

Date of Introduction: 16.7.2001 vide Notification No.4/2001-ST
                        dt.09.07.2001.
Definition:
      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.
                    (Section 65(51) of Finance Act, 1994 as amended)
      “Port” has a meaning assigned to it in clause (q) of Section 2 of
Major Port Trusts Act, 1963 (38 of 1963).
                   (Section 65(50) of Finance Act, 1994 as amended)
                                                                    113




Taxable events and scope of service:
      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.
                (Section 65(72) (zn) of Finance Act, 1994 as amended)
      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 authorized by the port
rendering these services is the service provider.

Value of Taxable Service:
      Some of the specific charges for the services rendered in
respect of port services are as follows.
(i) Port and dock charges consisting of berthing and mooring
charges, port dues, pilotage and towage, water supply charges,
salvage and diver charges, anchorage fee;
(ii) Cargo handling and storage charges consisting of wharfage for
general cargo, warehousing charges, cranage charges, ore handling
charges, wharfage on petroleum products, weighment charges for
lorries, traffic appliance charges, weighment charges for goods;
(iii) Railway haulage charges for rail-borne goods, local haulage
and storage;
(iv) Container handling charges consisting of import, export and
transhipment wharfage on containers, equipment charges for
handling of containers, container storage charges;
(v) Labour charges.
      All these charges form part of taxable value of port services.
Demurrage charges are recovered by port authority as a rental for
storage of goods. The fact that these charges apply only if the goods
overstay a prescribed free period, does not detract from their being
in the nature of a charge for providing a service in relation to goods.
                                                              114




      Accordingly they would form part of Taxable value. The
Dock Labour Board is liable to pay Service Tax on the labour
charges recovered by them. For any other charges not mentioned
above the Commissioner may decide the inclusion in the value of
taxable service on merits.    (Ministry’s F.No.B11/1/2001-TRU
dt.09.07.2001)

Exemption & Exclusion:

Estate rentals of the port which is charged for renting of
accommodation provided to outsiders and port users, lease rental
for land, etc. will not be liable to Service Tax as these are not
services rendered in relation to goods or vessels.
                  (Ministry’s F.No.B11/1/2001-TRU dt. 09.07.2001)




             AUTHORISED SERVICE STATION

Date of Introduction: 16.07.2001 vide Notification No.4/2001-ST
                     dt.09.07.2001
Definition:
                                                                  115


     “Authorized service station” means any service station or
center, authorized by any motor vehicle manufacturer, to carry out
any service or repair of any motor car or two wheeled motor
vehicle manufactured by such manufacturer.      (Section 65(8) of
Finance Act, 1994 as amended)

Taxable events and scope of service:

      The taxable service is any service provided to a customer by an
authorized service station, in relation to any service or repair of
motorcars or two wheeled motor vehicles.
                 (Section 65(72)(zo) of Finance Act, 1994 as amended)
      Any service or repair provided by an authorized service
station in relation to motorcars and two wheeled motor vehicles
only, 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.
      Authorized 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. Since the definition for value of
taxable service specifically provides that the reimbursement received
from the manufacturer of motor vehicles for free service rendered
to the customer is includible in the taxable value, such
reimbursement is leviable to Service Tax.
                  (Ministry’s F.No.B11/1/2001-TRU dt.09.07.2001)

Value of taxable service:
      The value of taxable service means gross amount charged by
service provider for such service rendered by him and includes the
reimbursement received by the authorized service station from
manufacturer for carrying out any service of any motor car or two
                                                                   116


wheeled motor vehicle manufactured by such manufacturer, but
dose not include the cost of parts or accessories, if any, sold to the
customer during the course of service or repair of motor car or two
wheeled motor vehicles.         (Section 67 of Finance Act, 1994 as
amended)
                                                                  117




                CARGO HANDLING SERVICE

Date of Introduction : 16th August, 2002 (Notification No.8/2002-
ST dated 01.08.2002)

Definition : Cargo handling service means loading, unloading,
packing or unpacking of cargo and includes cargo handling ser vices
provided for freight in special containers or for non-containerised
freight, services provided by container freight terminal or any
other freight terminal, for all modes of transport and cargo handling
services incidental to freight, but does not include handling of
export cargo or passenger baggage or mere transportation of goods.
                 (Section 65(21) of Chapter V of Finance Act, 1994)

Taxable Service : Any service provided to a person by a cargo
handling agency in relation to cargo handling services.
                           (Section 65(90)(zr) of Finance Act, 1994)

Scope of the Service : Examples of cargo handling services are
services provided in relation to cargo handling by Container
Corporation of India, Airport Authority of India, Inland Container
Depot, Container Freight Station etc. This is an illustrative list.
There are several other firms that are engaged in cargo handling.
                ( Board’s F.No.B11/1/2002-TRU dated 01.08.2002)


Value of Taxable Service : The gross amount charged by the
service provider for such services rendered by him.
                                  (Section 67 of Finance Act, 1994)
                                                                118


Who is responsible to pay Service Tax : The service provider i.e.
Cargo Handling Agency is responsible for payment of Service Tax.




Exemption & Exclusion : Handling of export cargo, passenger
baggage, mere transportation of goods, cargo handled by Airport
Authority of India for export are excluded from payment of Service
Tax. Cargo handling services render in relation to agricultural
produce or goods intended to be stored in cold storage are exempted
from payment of Service Tax vide Notification No.10/2002 dated
01.08.2002
                                                                119




        STORAGE AND WAREHOUSING SERVICE

Date of Introduction : 16th August, 2002 (Notification No.8/2002-
ST dated 01.08.2002)

Definition : Storage and Warehousing includes storage and
warehousing services for goods including liquids and gases but does
not include any services provided for storage of agricultural
products or any services provided by a cold storage.
                (Section 65(87) of Chapter V of Finance Act, 1994)

Taxable Service : Any service provided to a person by a storage or
warehouse keeper in relation to storage and warehousing of goods.
                           (Section 65(90)(zza) of Finance Act,
1994)

Scope of the Service : Storage and warehousing service for all kind
of goods are provided by public warehouses, private warehouses, by
agencies such as Central Warehousing Corporation, Airport
Authority, Railways, Inland Container Depots, Container Freight
Stations, storage godown and tankers operated by private
individuals etc. The storage and warehousing service provider
normally makes arrangement for space to keep the goods, loading,
unloading and stacking of goodsin the storage area, keep inventory
                                                                  120


of goods, makes security arrangements and provid e insurance cover
etc. (Board’s F.No.B11/1/2002-TRU dated 01.08.2002)

Value of Taxable Service: The gross amount charged by the service
provider for such services rendered by him.
                                 (Section 67 of Finance Act, 1994)

Who is responsible to pay Service Tax: The service provider i.e.
Storage and Warehousing provider is responsible for payment of
Service Tax.

Exemption & Exclusion : Cloak room services for passengers’
luggage at railway stations, bus stations etc. are do not come within
the purview of storage and warehousing service.
                 (Board’s F.No.B11/1/2002-TRU dated 01.08.2002)

                     EVENT MANAGEMENT

Date of introduction       : 16.08.2002 – vide Notification
                       No. 8/2002 Dated 1.8.2002

Definition :
     “Event Management” means any service provided in relation
to planning, promotion, organising and presentation of any arts,
entertainment, business, sports or any other event and includes any
consultation provided in this regard.
                (Section 65 (34) of the Finance Act, 1994, as
amended)
     “Event Manager” means any person who is engaged in
providing any service in relation to event management in any
manner.
                (Section 65 (35) of the Finance Act, 1994, as
amended)
                                                                   121


Taxable event and scope of service

     “Taxable Service” means any service provided to a client by an
event manager relation to event management.
   (Sub clause (ZV) of clause-90, Section 65 of the Finance Act,
1994,)

      An event manager is hired to execute an event such as product
launch of any corporate, promotional activities, concerts/r ock
show, official meets, award functions, beauty pageants,
entertainment events, exhibitions, private functions, sports events
etc. Event manager uses his expertise and ideas to manage an event.
Event manager is supposed to manage a venue, sets includin g
decoration of sets, mandap, chair, table, barricades, sound, light,
video, electricals, security, communication, invitations to the event
/ sale of tickets and publicity of the event. He also manages the
stage show, artist, musicians, choreographers and other
miscellaneous items for holding of event. All services provided by
the event manager are liable to service tax. This also covers any
consultation provided for organising an event.
            (Board’s     Notification   F.No.B       11/1/2002-TRU
      dtd.1.8.2002)




  Value of taxable service

      The gross amount charged by the event manager from the
client is the value of taxable service which is inclusive of amount
payable to sub-contractors, if any.

  Exemption and exclusion

          In case of in-house event or the event organised/managed
by the sponsor himself, no service tax is leviable. Service tax is not
                                                               122


leviable on the sale proceeds of tickets or revenue generated from
the sale of space.




             RAIL TRAVEL AGENT’S SERVICES

Date of Introduction: 16th August, 2002 (Notification No.8/2002-
ST dated 01.08.2002)

Definition: Rail Travel Agent means any person engaged in
providing any services connected with bookings of passage for
travel by rail.
                (Section 65(72) of Chapter V of Finance Act, 1994)
                                                                 123




Taxable Service: Any service provided to a person by a Rail Travel
Agent in relation to the booking of passage for travel by rail.
                           (Section 65(90)(zz) of Finance Act, 1994)

Scope of the Service: Any person whether registered with the
Railways or not, engaged in providing any service connected with
booking of passage for travel by rail is liable to service tax.
   (Board’s F.No.B11/1/2002-TRU dated 01.08.2002)


Value of Taxable Service: The gross amount charged by the service
provider for such services rendered by him.
                                 (Section 67 of Finance Act, 1994)


Who is responsible to pay Service Tax: The service provider i.e.
Rail Travel Agent is responsible for payment of Service Tax.


Exemption & Exclusion: NIL




        HEALTH CLUB AND FITNESS CENTRE

Date of Introduction: 16th August, 2002. (Notification No.
8/2002-ST dated 01.08.2002)
                                                                 124


Definitions:
      a)“health and fitness service” means service for physical well
being such as, sauna and steam bath, turkish bath, solar ium,
reducing or slimming salons, gymnasium, yoga, meditation, massage
(excluding therapeutic massage) or any other like service;
                 (Section 65(42) of Chapter V of Finance Act, 1994)

     b)“health club and fitness centre” means any establishment,
including a hotel or resort, providing health and fitness service;
                 (Section 65(43) of Chapter V of Finance Act, 1994)

Taxable Service:      Any service provided to any person, by a
health club and fitness centre in relation to health and fitness
services; and the term “service provider” shall be construed
accordingly.
           (Section 65(90)(zw) of Chapter V of Finance Act, 1994)

Scope of the Service: Health and fitness services are provided by
clubs, fitness centres, health saloons, hotels, gymnasiums and
massage centres. The services which fall under this category might
be for weight reduction and slimming, physical fitness exercise,
gyms, aerobics, yoga, meditation, reiki, sauna and steam bath,
turkish bath, sun bath and massage for general well being.
                (Board’s F.No. B11/1/2002-TRU, dated 1.8.2002)

Value of Taxable Service: The gross amount charged by the
service provider for such service rendered by him.
                                  (Section 67 of Finance Act, 1994)

Who is responsible to pay Service Tax: The service provider, i.e.
Health club and fitness centres are responsible for payment of
service tax.

Exemption and Exclusion: Therapeutic massage does not come in
the ambit of taxable service. Therapeutic massage basically means a
                                                                125


massage provided by qualified professionals under medical
supervision for curing diseases such as arthritis, chronic low back
pain and sciatica etc. Ayurvedic massages, acupressure therapy etc.
given by qualified professionals under medical supervision for
curing diseases/disorders will come under th e category of
therapeutic massages.
                                                                 126




                       BEAUTY PARLOUR

  Date of introduction: 16.08.2002 vide Notification No.8/2002
                            dated 01.08.2002

   Definition:
     “Beauty treatment means face and beauty treatment, cosmetic
treatment, manicure, pedicure.
               (Section 65(16) of Finance Act 1994) as amended.)

     “Beauty Parlour” means any establishment providing beauty
treatment services.   (Section 65(17) of Finance Act, 1994) as
amended.)

   Taxable event and Scope of Service :

  Taxable Service means any service provided to a customer by a
  beauty parlour in relation to beauty treatment, and the term
  “Service provider” shall be construed accordingly.

  As per clause (16), “beauty treatment’ includes face and beauty
  treatment, cosmetic treatment, manicure, pedicure or counselling
  services on beauty, face care or make-up and as per clause (17),
  “beauty parlour” means any establishment providing beauty
  treatment services. The taxable service, as per sub-clause (zq) of
  clause (90) means any service provided, to a customer, by a
  beauty parlour in relation to beauty treatment.

  This service covers the beauty treatments such as facial,
  manicure; pedicure and other make ups provided by beauty
  parlours. However, it does not include hair cutting and shaving.
  Further, it does not include plastic surgery/cosmetics surgery
  done to improve the appearance, as they are not the kind of
                                                              127


service provided by the beauty parlours. These are more
appropriately classifiable as medical services. (Ministry’s
F.No.B11/1/2002 TRU dt.01.08.2002)




 Value of taxable service:

The value of taxable service shall be the gross amount charged by
the service provider of such service rendered by him.

Exemption and Exclusion:

The services provided in relation to hair dying has been
exempted vide Notification No.11/2002 dt.01.08.2002.
                                                                    128




                       FASHION DESIGNER

Date of introduction:      16.08.2002 vide Notification No.8/2002
dated 1.8.2002

Definition:
      “Fashion Designing” includes any activity relating to
conceptualizing, outlining, creating the designs and preparing
patterns for costumes, apparels, garments, clothing accessories,
jewellery or any other articles intended to be worn by human
beings and any other service incidental thereto;
                (Section 65(37) of Finance Act, 1994, as amended)

      “Fashion Designer” means any person engaged inn providing
service in relation to fashion designing;
                  (Section 65(38) of Finance Act, 1994, as amended)

Taxable even and scope of service:
      “Taxable service” means any service provided to any person,
by a fashion designer in relation to fashion designing; and the term
“service provider” shall be construed accordingly.
      (Sub-clause (zv) of clause-90 Section 65 of Finance Act, 1994, as
amended)
                                                                     129


      Fashion designer conceptualize and create designs/patterns
applying his sense of aesthetic, keen sense of colour, visual
imagination, knowledge of market trend and as per requirement of
the client. Accordingly fashion designer may be in volved in
designing of any goods which are intended to be worn by human
being and where aesthetic/looks/fashion is a criterion for wearing
it. Fashion designers work include selection of material (for
example type of cloth, its colour, design, quantity etc), preparing
design as per the trend or as per his visual imagination, preparation
of pattern incorporating the requirement of the client. Fashion
designer also keeps in mind the occasion, season and time etc. when
his designed article is intended to be worn.
      (Ministry’s F.No.B11/1/2002 TRU dt.01.08.2002)



Value of taxable service :
      The value of taxable service shall be the gross amount charged
by the service provider of such service rendered by him. If the
fashion designer provides stitching service alongwith designing of
cloth as per the clients requirement, the fashion designer is liable to
pay Service Tax only on designing service rendered by him
provided designing charges are shown separately in the bill.
However if designing charges and stit ching charges are shown in
consolidated manner, service tax will be leviable on entire amount.

Exemption and Exclusion :
     A tailor involved only in stitching of cloth is not involved in
designing activity and is not liable to pay Service Tax. Garment
making is not taxable. Similarly making of jewellery and selling it
does not attract tax. However, service of a designer to design
jewellery is taxable. If a fashion designers designs article for himself
and makes these articles say garments and sells them, in such a case
designing service is provided to oneself by the designer and
therefore not liable to service tax.
                                                                  130




                      CABLE OPERATORS

Date of Introduction: 16.08.2000 vide Not.No.8/2000 dated
                        01.08.2000
Definitions:
    “Cable Operator” shall have the meaning assigned to it in clause
(aa) of Section 2 of the Cable Television Networks (Regulation)
Act, 1955. The said clause reads as “Cable Operator” means any
person who provides cable services through a television network or
otherwise contro ls or is responsible for the management and
operation of a cable television Network. (Section 65 (19) of Finance
Act, 1994 as amended).
      “Cable Services” as having the meaning assigned to it under
clause (b) of Section 2 of the cable Televisio n Network Act.The said
clause reads as “Cable Services” means the transmission by cables of
a programme including retransmission by cable of any broadcast
                                                                     131


television signals”.   (Section 65 (20) of Finance Act, 1994 as
amended).

Taxable event and scope of services :-
      “Taxable Service” means any service provided to a customer,
by a cable operator in relation to cable services.
(Section 65 (90)(ZS) of Finance Act, 1994 as amended by the
Finance Act, 2002).
      The taxable service in this case is the cable se rvices provided
by the cable operators. The programme broadcast by television
channel are received either by Multi System Operator (MSO) or
directly by cable operators in the forms of signals. Where MSO
receives the signals, the first retransmit signals to the cable operator
who is turn retransmits the same to the viewers through the cable
net work provided by the cable operator. Service Tax is liable to be
paid by the cable operator providing service to ultimate subscriber
of cableservices
      (Ministry’s Circular No.B.11/1/2000-TRU dtd.01.08.2002)

Value of Taxable Service :-
      The Value of taxable service shall be the gross amount charged
by the service provider for such service rendered by him.
(Section 65 of Finance Act, 1994 as amended by Finance act, 2002).


                         DRY CLEANING

Date of introduction : 16.08.2002 vide Notification No,8/2002
dated
                        01.08.2002
Definition :
    “Dry Cleaning” includes dry cleaning of apparels, garments or
other textile, fur or leather articles;
                  (Section 65 (31) of Finance Act, 1944 as amended)
                                                                     132


    “Dry Cleaner” means any commercial concern providing
service in relation to dry cleaning.
                  ( Section 65 (32) of Finance Act, 1944 as amended)

Taxable event & Scope of service:
      Taxable service means any service provided to a customer, by a
dry cleaner in relation to dry cleaning; and the term “service
provider” shall be constructed accordingly.
                  ( Sectio n 65 (32) of Finance Act, 1944 as amended)
      As per clause (31), “dry cleaning” includes dry cleaning of
apparels, garments or leather articles. As per clause (32) “dry
cleaner” means any commercial concern providing service in
relation to dry cleaning. The taxable service, as per clause (90) (zt)
is any service provided to a customer, by a dry cleaner in relation to
dry cleaning.
      Dry cleaner normally performs following process as on cloths
during the process of dry cleaning:
i) Tagging and inspection-Dry cleaner inspects the cloths and tags
    them with an identification lable.
ii) Pre-treatment a stain remover is applied to remove the stains.
    Use of stain remover depends on the nature of stains such as
    stains or grease, oil, ink, colours etc. Fabrics/cloth is then rinsed
    and dried.
iii)Dry cleaning a dry cleaning machine is a motor driven
    washer/extractor/dryer and it holds clothes in a rotating,
    perforated stainless steel basket. Cloths are washed with a
    solvent. There may be various types of solvents used for dry
    cleaning such as perchloethlene (perc), carbon, tetrachloride,
    trichloethlene and petrol etc. As the clothes rotate in the
    perforated basket, there is a constant flow of clean solvent from
    the pump and filter system. After cleaning, the cloths are
    drained to expel the solvent and ten goes into a dry cycle by
    circulating warm air.
iv)Post spotting- If there is any spot/stain left after the dry cleaning,
    it is removed using water or any other appropriate chemical.
                                                                   133


                (    Ministry’s    F.No.B11/1/2002 -TRU,        dated
  01.08.2002)

Value of taxable service:

      Value of taxable services shall be the gross amount charged by
the service provider for such service rendered by him.

Exemption and Exclusion:

      Wet cleaning is process of cleaning garments in water and
water and water soluble detergent. It is clarified that service tax is
leviable on dry cleaning. Accordingly service tax is not leviable on
wet cleanings washing provided the dry cleaner clearly mentions it
in the bill. If details are not mentioned in the bill, it would
normally be understood that cloths have been dry cleaned and in
such situation service tax is liable to be paid.
                                                                  134




  COMMERCIAL TRAINING OR COACHING CENTRE


Date of Introduction: 01.07.2003 vide Notification No. 07/2003
dated 20.06.2003
Definitions:
  a)    ‘commercial training or coaching’ means any training or
        coaching provided by a commercial training or coaching
        centre;
   b) “commercial training or coaching centre” means any
        institute or establishment providing commercial training or
        coaching for imparting skill or knowledge or lessons on any
        subject or field other than the sports, with or without
        issuance of a certificate and includes coaching or tutorial
        classes but does not include preschool coaching and training
        centre or any instit ute or establishment which issues any
        certificate or diploma or degree or any educational
        qualification recognized by law for the time being in force;
   c)   “Taxable service” means any service provided to any
        person, by a commercial training or coaching centre in
        relation to commercial training or coaching; and the term
        “service provider” shall be construed accordingly.
Value of taxable service:
      Value of taxable service shall be the gross amount charged by
the service provider of such service rendered by him.
Scope of Service:
      Commercial coaching and training institutes that prepare
applicants for Board/University Examinations, Competitive Exams
like entrance examinations for IIT’s, IIM’s, Pre-Medical tests, Civil
Services exams etc., or who impart knowledge in any field other
than sports are required to pay service tax. However, pre-school
                                                                   135


coaching or training centres or any institute or establishment,
which issues a certificate of diploma or degree or any educational
qualification recognized by law for time being in force, are excluded
from tax net.
   Exemptions :
   i. Services in relation to commercial coaching and training
   provided by :-
   a) Vocational training institutes;
   b) Computer training institute; and
   c) Recreational training institute;
   were exempted from service tax w.e.f. 1 st July, 2003 vide
   Notification No.9/2003-Service Tax dated 20th June, 2003 as
   amended. Therefore, vocational coaching and training services
   provided by typing and shorthand institutes, TV/vehicle repair
   training institutes, tailoring institutes, industrial training
   institutes, foreign language institutes, computer-training centers,
   hobby classes, institutes teaching martial arts, painting, dancing
   etc. were not chargeable to service tax. This exemption was in
   force upto 30.06.2004. In absence of extension of this exemption,
   these services fall under purview of Service Tax.
   ii. Institutes like the Institute of Chartered Accountants of India
   some time hire the services of other institutes to impart some
   part of training (like language or computer training) to the
   students undertaking courses for obtaining recognized
   degrees/diplomas (like Chartered Accountancy) from their
   institute. Whereas the Institute of Chartered Accountants of
   India will not be chargeable to service tax because they confer
   qualifications recognized by law, the institutes or centers
   providing such part of training may be otherwise under service
   tax net. Vide notification No. 10/2003-such coaching or training
   is exempted from service tax which form an essential part of the
   course or curriculum leading to issuance of recognized certificate,
   diploma, degree or any other educational qualification. The
   exemption is subject to the condition that the receiver of such
   service (for example, student) makes payment for the entire
                                                                   136


  course or curriculum to the institute or establishment issuing
  such certificate, diploma etc. and not to the commercial coaching
  or training center.

Board’s clarifications: Circular No. 59/8/2003 dated 20.06.2003
  i.    Commercial coaching provided through postal means
        would also be covered under service tax and the charges
        including postal charges collected for rendering this service
        would be subjected to service tax.
  ii.   Whether service tax is leviable on institutes providing
        commercial coaching in addition to recognized degree
        courses:
        Some institutes like colleges, apart from imparting
        education for obtaining recognized degrees/diploma/
        certificates, also impart training for competitive
        examinations, various entrance tests etc. It is clarified that
        by definition, such institutes or establishments, which issue
        a certificate, diploma or degree recognized by law, are
        outside the purview of “commercial training or coaching
        institute’. Thus, even if such institutes or establishments
        provide training for competitive examinations etc., such
        services rendered would be outside the scope of service tax.
  iii. Whether individuals going to houses to impart
        tuition/coaching would be chargeable to service tax:
                It is clarified that service tax is on institution
        /establishments. Therefore, only those service providers
        are covered under the service tax who have some
        establishment for providing commercial coaching or
        training i.e. institution coaching or training.         Thus,
        individuals providing services at the premises of a service
        receiver would not be covered under service tax. However,
        if coaching or training centre provides commercial coaching
        by sending individuals to the premises of service receivers,
        such services would be chargeable to tax, as in this case, the
                                                                    137


        individuals are rendering services on behalf of an
        institution.
  iv. Whether free summer training/in house training provided
        by employers to their employees are covered under service
        tax net:
                It is clarified that in case employers provide any free
        training themselves, no service tax is chargeable. However
        if an employer hires an outside commercial coaching or
        training centre for imparting some training to its
        employees, then the payment made by the said employer to
        such coaching center will be chargeable to service tax.
  Circular No.65/14/2003 dated 05.11.2003
     Where value of taxable service is received in advance for a
  service which became taxable subsequently, service tax has to be
  paid on the value of service attributable to the relevant
  month/quarter which may be worked out on pro -rata basis.




   COMMISSIONING AND INSTALLATION SERVICE.

   Date of introduction: - 01.07.2003 vide Notification No.7/2003
                           dated 20.06.2003.
   Definitions:
(a) ‘commissioning or installation’ means any service provided
   by a commissioning and installation agency in relation to
     commissioning or installation of plant, machinery or
   equipment;
(b) “commissioning and installation agency” means any agency
     providing service in relation to commissioning or installation;
(c) “Taxable service” means any service provided to any person to
     a customer by a commissioning and installation agency in
     relation to Erection, commissioning or installation’ and the
     term “service provider” shall be construed accordingly.
                                                                      138


      In the Budget proposals for the year 2004-05, the various
      definitions of this category of service are proposed to be amended
      to specifically include services in relation to Erection also under
      tax net.

Value of taxable service:
      Value of taxable service shall be the gross amount charged by
the service provider of such service rendered by him. However, it
does not include the cost of parts or other materials, if any, sold to
the customer during the course of providing commissioning or
installation service.

Scope of Service:
      Services provided by Commissioning and Installation Agency,
in relation to Commissioning or installation of plant, machinery or
equipment are chargeable to service tax.
      As per Board’s Circular No.49/11/2002 dated 18.12.2002,
prior to 01.07.2003, this service was covered under the category of
Consulting Engineer Services. However, Board vide Circular
No.79/9/2004 dated 13.05.2004 has in consultation with law
Ministry has again clarified that this service is not covered under the
category of Consulting Engineer services and Circular
No.49/11/2002 dated 18.12.2002 was modified to that extent.



Exemptions:

i)      Taxable service provided to a customer in relation to
        commissioning and installation by a commissioning or
        installation agency, other than a commercial concern is
        exempted. (Notification No.18/2003-ST dated 21.08.2000)

ii)     Service tax is to be paid on 33% of gross value if the
        Commissioning or Installation services are provided alongwith
                                                                  139


     supply of Plant, Machinery or equipment, provided that gross
     value is inclusive of value of Plant, Machinery, equipment,
     parts or any other material sold and no exemption is claimed
     under Notification No.12/2003 S.T. dated 20.06.2003
     (Notification No.19/2003-S.T. dated 21.08.2003).

Board’s Clarifications:    Circular No.59/8/2003 dated 20.06.2003

     In case of commissioning and installation it has been pointed
  out that in case of turnkey project, the contract may be
  indivisible and no separate value could be assigned to
  commissioning or installation of goods. Doubts have also been
  raised as to what would be the value of taxable service. It is
  submitted that it has been provided in law that service tax is
  leviable on erection and commissioning charges only and not on
  the material and goods supplied. However, it is upto the service
  provider to show the break up of commissioning or installation
  charges. In case service provider shows consolidated charges,
  service tax would be leviable on such consolidated amount.

     A doubt has been raised as to whether charges for erection of
  plant are covered under the service tax or only commissioning
  and installation charges. It is clarified that the law specifically
  provides for taxation of commissioning and installation of plant,
  machinery or equipment. Thus all activities other than the
  commissioning          and        installation        of        the
  plant/machinery/equipment per se, will not be chargeable to
  service tax.



     Circular No.62/11/2003 dated 21.08.2003
     1.1 Commissioning or installation of plant, equipment or
          machinery by a commissioning or installation agency, is
          chargeable to service tax. A doubt has been raised as to
                                                              140


      whether the services like a plumber putting up a water
      tank, fitting pipes and tubing, an electrician putting up
      electric wire and fittings, installation of booster motors,
      air conditioners, water filters, hand-pumps, water heaters
      etc. will be chargeable to service tax.

1.2   As commonly understood, the activity of installation
      means the act of putting an equipment, machinery or
      plant into its place and making it ready for use. The
      activity of installation will start after erection which
      would refer to putting up civil structures.
      Commissioning of a plant would mean operationalising
      an installed plant/equipment/machinery.           In this
      backdrop it is clarified that putting up a water tank,
      piping, electric wiring, in a residential premises etc.
      would not be covered in the definition of taxable service
      and thus would not be taxable. However, installing a
      booster pump, air-conditioner, water filter, water heater
      etc. would be covered in the definition and be taxable, as
      all these things are machinery or equipment.
                                                                   141


  TECHNICAL TESTING AND ANALYSIS (EXCLUDING
       HEALTH AND DIAGNOSTIC TESTING);
   TECHNICAL INSPECTION AND CERTIFICATION.


Date of Introduction : 01.07.2003 vide Notification 07/2003 dated
20.06.2003
Definitions :
   (a) ‘technical testing and analysis’ means any service in relation
        to physical, chemical, biological or any other scientific
        testing or analysis of goods or material or any immovable
        property, but does not include any testing or analysis
        service provided in relation to human bein gs or animals;
   (b) ‘technical testing and analysis agency’ means any agency or
        person engaged in providing service in relation to technical
        testing and analysis;
   (c) ‘technical inspection and certification’ means inspection or
        examination of goods or process or ma terial or any
        immovable property to certify that such goods or process
        or material or immovable property qualifies or maintains
        the specified standards, including functionality or utility or
        quality or safety or any other characteristic or parameters,
        but does not include any service in relation to inspection
        and certification of pollution levels;
   (d) ‘technical inspection and certification agency’ means any
        agency or person engaged in providing service in relation to
        technical inspection and certification.
   (e) “Taxable service” means any service provided to any person
        -
        (i)   by a technical testing and analysis agency, in relation
              to technical testing and analysis;
        (ii) by a technical inspection and certification agency, in
              relation to technical inspection and certification;
        and the term “service provider” shall be construed
        accordingly.
                                                                   142


Value of taxable service: Value of taxable service shall be the gross
amount charged by the service provider of such service rendered by
him.



Scope of Service :
  (i)  Services provided by Technical Testing and Analysis
       Agency in relation to technical testing or analysis.
  (ii) Services provided by technical inspection and certification
       agencies in relation to technical inspection and certification.

  Board’s Clarification : Circular No. 59/8/2003 dated 20.06.2003
      A doubt has been raised whether certification given in respect
  of immovable property should fall under the purview of
  ‘technical inspection and certification services’. In this regard it
  may be recalled that earlier, CBEC vide its order No.1/1/2002,
  dated 26.02.2003, issued under Section 37B (of the Central Excise
  Act as made applicable to service tax) had clarified that
  certification given under authority of any code or statute can not
  be considered as a consulting engineer service. However, the
  new service included in 2003 budget, namely ‘technical
  inspection and certification services’ would cover certification of
  all types including that of immovable property. Therefore, it is
  clarified that such services become taxable from the notifie d date.
                                                                     143




                      FRANCHISE SERVICES

Date of introduction        : 01.07.2003 – vide Notification
                        No. 7/2003 Dated 20.06.2003
Definition :
a) “Franchise” means an agreement by which -
   i) franchisee is granted representational right to sell or
       manufacture goods or to provide service or undertake any
       process identified with franchisor, whether or not a trade
       mark, service mark, trade name or logo or any such symbol,
       as the case may be, is involved;
   ii) the franchisor provides concepts of business operation to
       franchisee, including know how, method of operation,
       managerial expertise,       marketing technique or training and
       standards of quality control except passing on the ownership
       of all know how to franchisee;
   iii) the franchisee is required to pay to the franchisor, directly or
       indirectly, a fee and
   iv) the franchisee is under an obligation not to engage in selling
       or providing similar goods or services or process, identified
       with any other person;
b) "franchisor" mean any person who enters into franchise with a
franchisee and includes any associate of franchisor or a person
designated by franchisor to enter into franchise on his behalf and
the term "franchisee" shall be construed accordingly;
                                                                   144


c) "taxable service" means any service provided to a franchisee, by
the franchisor in relation to franchise; and the term "service
provider" shall be construed accordingly.

Value of Taxable Service: Value of taxable service shall be the
gross amount charged by the service provider of such service
rendered by him.

Scope of Service: Service tax is payable on the gross amount
charged by the franchisor from the Franchisee in relation to
Franchise.

   Board's Clarification: Circular No.59/8/2003 dated 20.06.2003
   Franchise service is a service provided by Franchisor to a
Franchisee. Section 65 of the Finance Act, 1994, (sub section 47)
defines franchise as a specific type of agreement. This agreement has
various ingredients, which have been specified in the said definition.
For removal of doubt it is clarified that unle ss all the ingredients
mentioned at (I) to (iv) of the said sub section are satisfied the
agreement can not be called as franchise agreement. These
ingredients are :
     (i) the franchisee is granted representational right to sell or
           manufacture goods or to provide service or undertake
           any process identified with franchisor, whether or not a
           trade mark, service mark, trade name or logo or any such
           symbol, as the case may be, is involved;
     (ii) the franchisor provides concepts of business operation to
           franchisee, including know how, method of operation,
           managerial expertise, marketing techniques or training
           and standards of quality control except passing on the
           ownership of all know how to franchisee;
     (iii) the franchisee is required to pay to the franchisor,
           directly or indirectly, a fee; and
                                                                  145


     (iv) the franchisee is under an obligation not to engage in
           selling or providing similar goods or services or process,
           identified with any other person.
     For example, the mere fact that a principal manufacturer has
     allowed production of goods bearing his brand name by
     another person under ‘License Production Agreement’, does
     not make the agreement a Franchise Agreement. A franchise
     agreement also includes the franchisee being obliged to follow
     the concept of business operation, managerial expertise,
     market techniques etc. of the franchisor and is under an
     obligation not to engage in selling, producing or providing
     similar goods or service, identified with any other person.
     Therefore, in the absence of such ingredients, a mere licensed
     production cannot be called as a franchise agreement and
     accordingly the license fees paid for such license production
     cannot be charged to Service Tax.




         MAINTENANCE AND REPAIR SERVICES

Date of Introduction : 01.07.2003 vide Notification No. 07/2003
dated 20.06.2003

Definitions :
  (a) “maintenance or repair” means any service provided by -
        (i)   any person under a maintenance contract or
              agreement; or
        (ii) a manufacturer or any person authorized by him,
        in relation to maintenance or repair or servicing of any
        goods or equipment, excluding motor vehicle;
                                                                    146


  (b)   ‘motor vehicle’ has the meaning assigned to it in clause (28)
        of Section 2 of the Motor Vehicles Act, 1988 (59 of 1988);
  (c)   “Taxable service” means any service provided to any person
        / customer, by any person in relation to maintenance or
        repair; and the term “service provider” shall be construed
        accordingly.

Value of taxable service :
      Value of taxable service shall be the gross amount charged by
the service provider of such service rendered by him. However, it
does not inclu de the cost of parts or other materials, if any, sold to
the customer during the course of providing maintenance or repair
service.



Scope of Service :
     Maintenance, repair or servicing done under a contract, or by
a manufacturer or any person authorized by him, of any goods or
equipments, excluding motor vehicles is chargeable to service tax.

Exemptions :
  (i)  Maintenance or repair done under contracts which were
       entered prior to 1st July, 2003 are exempted for that part of
       the value of the service for which bill/invoices were raised
       and the amount has actually been received prior to 1st July,
       2003 (Notification No. 11/2003-ST dated 20.06.2003). For
       all such contracts, all subsequent payments or payments
       made against invoice issued subsequent to 1st July, 2003 will
       be chargeable to service tax.
  (ii) Maintenance or repair of computers, computer systems and
       computer peripherals was exempted vide Notification
       No.20/2003 dated 21.08.2003. However said exemption is
       withdrawn w.e.f. 09.07.2004 vide Notification No. 07/2004
       dated 09.07.2004.
                                                                  147




Board’s Clarifications :
(i)  Circular No. 59/8/2003 dated 20.06.2003
         Certain doubts have been raised in case of maintenance
     and repair services as to whether service tax on maintenance
     and repair would be charged in case           where during the
     guarantee period, the services are provided to the buyer of
     the goods while the payments for the same are received
     from the supplier of the goods. In this regard it is clarified
     that irrespective of the fact that the receiver of the service is
     different from the person making payments for such
     services, the service tax is leviable on the services provided
     towards maintenance and repair. Therefore, for the services
     provided during the warranty period by the dealer or any
     other authorized person, service tax would also be leviable
     on any amount received by such dealer or such other
     authorized person from manufacturer of such goods.
(ii) Circular No.70/19/2003 dated 17.12.2003
         ‘Maintenance or repair’ means any service provided by
     (i) any persons under a maintenance contract or agreement
     or (ii) a manufacturer or any person authorized by him in
     relation to maintenance or repair or servicing of any goods
     or equipment. In the case of Maintenance of Software
     repair is not of tangible goods but that of intangible
     program/software which is in installed condition and thus
     the maintenance and repair of software is not maintenance
     and repair of ‘goods’. Further an exemption was granted to
     maintenance or repair services in relation to computer,
     computer systems and computer peripherals vide
     Notification No.20/2003-ST dated 21.08.2003. As such
     computer software would form a part of computer system
     and thus maintenance of software being a sub-set of
     maintenance of computer systems were covered under this
     notification. Under the category of ‘consulting engineer’
     vide Notification No.4/99/ -ST dated 28.02.99, taxable
                                                               148


     service provided to any person by a consulting engineer in
     relation to computer software is exempted. The definition
     of ‘Business Auxiliary Service’ also specifically provides
     that; inter alia, maintaining of computer software is covered
     in the service, which is excluded from the scope of business
     auxiliary service.
        Taking the above into consideration, it is to clarify that
     maintenance of software was not chargeable to Service Tax.
        However exemption to Maintenance or repair of
     computer, computer systems or peripherals is withdrawn
     vide Notification No.07/2004 dated 09.07.2004.

(iii) Circular No.74/4/2004-ST dated 23.01.2004
         The machines like ATM perform independent functions
using processed data. Whereas principal function of computers is
processing of data.      Thus machines like ATM having
independent functions cannot be considered as computers.
Therefore maintenance or repair of such machines was not
entitled for exemption under Notification No. 20/2003.
                                                                   149




                BUSINESS AUXILIARY SERVICE

Date of introduction       : 01.07.2003 – vide Notification
                       No. 7/2003 Dated 20.06.2003

Definition :
b) “Business Auxiliary service” means any service in relation to --
   j) promotion or marketing or sale of goods produced or
      provided by or belonging to the client; or

  ii) promotion or marketing of service provided by the client; or

   iii) any customer care service provided on behalf of the client; or
   iv) any incidental or auxiliary support service such as billing,
       collection or recovery of accounts and remittance evaluation
       of prospective and public relation services,
and includes services as a commission agent, but does not include
any
information technogloy service.
Explanation: For the removal of doubts, it is hereby declared that
             for the purposes of this clause “Information technology
             service” means any service in relation to designing,
             development or maintaining of computer software, or
             computerized data processing or system networking, or
             any other service primarily in relation to operation of
             computer system.
             In the Budget proposal for the year 2004-05 following
further additions are proposed in the definition of “Business
Auxiliary Service”.
       iv) procurement of goods or services, which are inputs for
             the client; or
       v)    production of goods on behalf of the client; or
       vi) provision of service on behalf of the client; or
                                                                      150


          Further the earlier entry no.(iv) is proposed to be
     amended as under and renumbered as (vii)
     vii) a service incidental or auxiliary to any activity specified
          in sub-clauses (i) to (vi), such as billing, issue or collection
          or recovery of cheques, payments, maintenance of
          accounts and remittance, inventory management,
          evaluation or development of prospective customer or
          vendor, public relation services, management or
          supervision.
          and includes services as a commission agent, but does not
          includes any information technology service and any
          activity that amounts to “manufacture” within the
          meaning of clause (f) of section 2 of the Central Excise
          Act, 1944.

Value of Taxable Service: Value of taxable service shall be the
gross amount charged by the service provider of such service
rendered by him.

i)   Scope of Service: Any service provided to a client for
     promotion or marketing of his goods/services, providing
     customer care service on behalf of the client, or providing any
     incidental or auxiliary support service to the client for conduct
     of his business is taxable. However services in relation to
     information technology are excluded from tax net.

Exemptions:
i)  Call centres & Medical transcription centres are exempted
    from payment of service tax (Notfn.8/2003 S.T. dated
    20.06.2003)
ii) The commission agents were exempted from payment of
    service tax vide Notfn.No.13/2003-S.T. dated 20.06.2003.
    However with effect from 09.07.2004, by virtue of
    amendment to above notfn. Vide Notfn.8/2004-S.T. dated
                                                                     151


     09.07.2004, the exemption is available only to the commission
     agents dealing in agricultural produce.

   Board's Clarification: Circular No.59/8/2003 dated 20.06.2003
      As per the definition of business auxiliary services, services of
commission agent are considered business auxiliary services.
However services of commission agents have been exempted from
service tax w.e.f. 1st July, 2003 vide notification No.13/2003-Service
Tax dated 20th June 2003. Commission agent has been defined in
the notification, as a person who causes sale or purchase of goods,
on behalf of another person for a consideration, which is based on
the quantum of such sale or purchase. It may be noticed that the
exemption under this notification is for a commission agent while
the services of a consignment agent remain taxable under the
category of Clearing and Forwarding Services.             It may be
appreciated that the nature of service provided by a Consignment
agent is different than that provided by a commission agent. A
consignment agent's job is to receive the goods from the principal
and dispatch them on the directions of the principal whereas a
commission agent's job is to cause sale/purchase on behalf of
another person. Thus, the essential difference is that a commission
agent sells or purchase on behalf of the principal while consignment
agent receives and dispatches the goods on behalf of a principal. It
is possible that a person may be a consignment agent as well as a
commission agent. Such a person would already be covered in the
category of Clearing and Forwarding agent and would be liable to
pay service tax in that category. In other words, the present
exemption is available only to such commission agent who is not a
consignment agent.

      Certain doubts have been raised in case of business auxiliary
services. In this regard the following is clarified,-
      While it is not possible to give an exhaustive list of business
 auxiliary services, the following are illustrations of services that are
 covered under this category viz. evaluation of prospective
                                                                   152


customers, processing of purchase orders, customer management,
information and tracking of delivery schedules, accounting and
processing of transactions, operational assistance for marketing,
formulation of customer service and pricing policies, managing
distribution & logistics. The services provided in relation to
getting a customer, verification of prospective customer, processing
of purchase order etc would also be covered under service tax, as
the law specifically provides for inclusion of such services as
business auxiliary support services.
      As regards the question whether insurance agents, C&F agents
working on commission basis fall under the definition of business
auxiliary services, it is clarified that they do not, as they are
specifically covered within the definition of other specified taxable
services, namely the Insurance service and C&F service
respectively. Under Section 65A of Finance Act, 1994, it has also
been provided that in case of overlap, a service would be classified
under the head, (a) which provides most specific description, (b) in
case of a composite service having combination of different taxable
services, the service which give them their essential character and
(c) in case the test of (a) and (b) does not resolve, the service which
comes earlier in the clauses of Section 65, i.e. the service that was
subjected to service tax prior to imposition of tax on business
auxiliary service, the insurance agents, C&F agents working on
commission basis would fall under those respective categories.
From this, it follows that a particular service can be taxed only
under one head of service.
      As per the definition of business auxiliary services,
information technology service is outside the purview of business
auxiliary services. in the explanation appended to the definition in
the Act itself, it has been clarified that information technology
service means any service in relation to designing, developing or
maintaining of computer software or computerized data processing
or system networking or any other service primarily in relation to
operation of computer systems. In this regard, it is clarified that
only if the output service provided by a service provider is in the
                                                                  153


nature of the above operations, such exclusion would operate. The
mere fact that a personal computer or a laptop has been used for
providing the service does not, ipso facto, make the service an
information technology service. Similarly, the fact that any of the
IT services mentioned in the explanation has been used by the
service provider as an input service does not automatically make
the output service an IT service. Therefore, in such cases,
individual service has to be examined with reference to the
explanation provided to the definition of business auxiliary service
and only such output services which qualify to be IT services in
terms of the said explanation shall remain excluded from taxable
service under the heading business auxiliary service.

   Circular No.62/11/2003 dated 21.08.2003
Scope of IT service under Business Auxiliary Service
       The definition of Business Auxiliary Service in the law
excludes the Information Technology IT services. As per the
definition IT service means any service in relation to designing,
developing or maintaining of computer software or computerized
data processing or system networking or any other service
primarily in relation to operation of computer systems. It was
clarified in Circular No.59/8/2003, dated 20th June 2003 that only if
the output service provided by a service provider is in the nature of
the above operations, such exclusion would operate. The mere fact
that a personal computer or a laptop has been used for providing
the service does not, ipso facto, make the service an information
technology service. Similarly, the fact that any of the IT services
mentioned in the explanation has been used by the service provider
as an input service does not automatically make the output service
an IT service.

      A doubt has been raised that the clarification in the said
circular dated 20.06.03, is at odds with the letter F.No.334/1/2003-
TRU dated 28.02.2003 which states, "However computer enable
services, namely, data processing, networking, back office
                                                                  154


processing, computer facility management shall not be subjected to
Service Tax." It is claimed that back office processing may include
accounts outsourcing or payroll-processing activities etc. and such
service may not be primarily in relation to computer system.

       It is clarified that there is no contradiction between the
clarifications dated 20.02.03 and dated 20.06.03. The scope of IT
services is explained in the definition of Business Auxiliary Service
in the Act itself as any service in relation to designing, developing
or maintaining of computer software or computerized data
processing or system networking or any other service primarily in
relation to operation of computer systems. The last words
"primarily in relation to operation of computer systems" make the
intention abundantly clear. The words "back office processing"
used in the clarification dated 28.02.2003 have to be read in
conjunction with the other terms used therein viz. data processing,
networking, computer facility management. Thus any service of
back office processing primarily in relation to operation of
computer systems will be covered as IT services and not taxable.
Payroll-processing, accounts management etc. even by using
computer programs, can not be termed as activities primarily
relation to computer system. The use of computer in these services
is secondary and the primary activity is that of business -related
work. Thus these services will be taxable as Business Auxiliary
Services. This is exactly the position that has been clarified in the
circular dated 20.06.2003.




Circular No.66/15/2003 dated 05.11.2003
      Applicability of service tax on commission income earned on
distribution and marketing of units of mutual fund.
                                                                  155


      Some doubts have been raised regarding application of service
tax on the activity of Mutual Fund Distribution as to whether
1) the commission received by distributors on mutual fund
   distribution as liable to Service Tax under the category of
   Business Auxiliary Services?
2) the services provided is exempt from service tax in terms of
   Notification No.13/2003 dated 20.06.2003?

In this connection, it is clarified that the services provided as
referred above are primarily in nature of the services of commission
agent in relation to clause (ii) and (iv) of the category of services
mentioned in the definition of Business Auxiliary Services and
hence should be leviable to service tax under this category. This
activity does not get covered under exemption Notification
No.13/2003-ST dated 20.06.2003 as this is not in relation to sale or
purchase of goods. The exemption provided under Notification
13/2003-ST is applicable only for commission agents dealing in
goods.
                                                                 156


                         INTERNET CAFE

Date of in troduction       : 01.07.2003 – vide Notification
                        No. 7/2003 Dated 20.06.2003

Definition:
     (a) "Internet Café" means a commercial establishment
providing
          facility for accessing internet;
     (b) "Taxable Service" means any service provided to any
          person to any person, by an internet café in relation to
          access of internet; and the term " service provider" shall
          be construed accordingly.

Value of Taxable Service:
    Value of taxable service shall be the gross amount charged by
    the service provider of such service rendered by him.

Scope of Service:
      Facilities provided by the commercial establishments to the
    customers for accessing internet for monetary consideration
    are chargeable to Service Tax.
                                CLEANING SERVICE
Date of Introduction: 16.06.2005 vide Notification No.15/2005 dated
                              07.06.2005
Definitions:
         “cleaning activity” means cleaning, including specialised cleaning services
such as disinfecting, exterminating or sterilising of objects or premises, of —
(i) commercial or industrial buildings and premises thereof; or
(ii) factory, plant or machinery, tank or reservoir of such commercial or industrial
buildings and premises thereof, but does not include such services in relation to
agriculture, horticulture, animal husbandry or dairying; (section 65(24b))
         “taxable service” means any service provided or to be provided to any
person, by any other person, in relation to cleaning activity; (section
65(105)(zzzd))

Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006

Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cases, where
the provider of taxable service is located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
read with Taxation of Services (Provided from outside India and received in India)
Rules, 2006

Scope of Service:
Any service provided or to be provided to any person, by any other person, in
relation to cleaning activity is taxable under sub-clause (zzzd) of section 65(105)
of the Finance Act, 1994. “Cleaning activity” has been defined under clause (24b)
of section 65 of the Finance Act, 1994.
     Generally contracts / agreements are entered into for cleaning of commercial
complexes such as multiplexes, shopping complexes, office complexes, industrial
buildings etc. The contracts / agreements may be in writing or may be unwritten.
                                                                              .
The gross amount charged for such cleaning would be leviable to service tax This
taxable service includes,-

(i) specialized cleaning services such as disinfecting and exterminating,
sterilization of objects, etc. Such cleaning services would be taxable when
performed for commercial or industrial buildings and their premises, factories,
plant and machinery, tank or reservoir of such buildings;

(ii) Disinfecting, exterminating insects, rodents and other pests and fumigation
services in respect of specified premises would be liable to service tax. In respect
of multi-storeyed commercial buildings, window cleaning is a specialized service.
Window cleaning services, including exterior window cleaning using swing stages
would be liable to service tax;

(iii) Floor cleaning and waxing, wall cleaning etc. performed on the premises of
commercial or industrial buildings;

(iv) Specialized cleaning services such as cleaning services for computer rooms,
cleaning of machinery or plant, reservoirs and tanks of commercial or industrial
buildings, furnace and chimney cleaning services and similar services.
        However, such cleaning services in relation to agriculture, horticulture,
animal husbandry or dairying would be excluded from the purview of service tax.
Further, such cleaning services in respect of non-commercial buildings and
premises thereof would not be covered within the purview of service tax under
this category.
                         (Ref: Board’s Circular No. F.No.B1/ 6 /2005      -TRU
               dated 27.07.2005)


General Exemptions:
Sr.No.    Notification No.                    Nature of exemption
  1          16/2002           Services provided to United nations or any
                               International Organisation
                               Exemption to value of goods and material sold
   2           12/2003         during the course of providing taxable service,
                               subject to conditions laid down in the notification.
   3            4/2004         Service provided to a developer of Special
                               Economic Zone or Unit located in SEZ
                               Exemption from service tax for taxable services
   4            6/2005         upto gross value of Rs. 4 lakhs, in case of service
                               providers whose gross turnover for the preceding
                               financial year was less than Rs. 4 lakhs ( w.e.f
                               01.04.2005)
                          CLUBS AND ASSOCIATIONS

Date of Introduction: 16.06.2005 vide Notification NO.15/2005 dated
                              07.06.2005
Definitions:
        “club or association” means 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—
(i) any body established or constituted by or under any law for the time being in
force; or
(ii) any person or body of persons engaged in the activities of trade unions,
promotion of agriculture, horticulture or animal husbandry; or
(iii) any person or body of persons engaged in any activity having objectives
which are in the nature of public service and are of a charitable, religious or
political nature; or
(iv) any person or body of persons associated with press or media; (section
65(25a))
        “taxable service” means any service provided or to be provided to its
members, by any club or association in relation to provision of services, facilities
or advantages for a subscription or any other amount; (section 65(105)(zzze))

Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
                                                 h
consideration ( if any) received for providing suc service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006

Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cases, where
the provider of taxable service is located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
read with Taxation of Services (Provided from outside India and received in India)
Rules, 2006
Scope of Service:
Any service provided or to be provided to its members by any club or association
in relation to provision of services, facilities, or advantages for a subscription or
any other amount is taxable under sub-clause (zzze) of section 65(105) of the
Finance Act, 1994. “Club or association” has been defined under clause (25a) of
section 65 of the Finance Act, 1994.

    Various clubs or associations provide services, facilities or advantages to their
members for a subscription or a charge. This taxable service covers within its
ambit the charges recovered by such clubs or associations for membership and
providing various services. However, exclusions have been made in respect of
specific clubs or associations which will not be covered within the ambit of clubs
or associations for the purpose of levy of service tax.

    These exclusions cover any body established or constituted by or under any
law, trade unions, clubs or association formed for promotion of agriculture,
horticulture or animal husbandry, clubs or association which are non pr           ofit
making bodies and are engaged in any activity which are in the nature of public
service and are of a charitable, religious or political nature, clubs or associations
associated with press or media.

     Legally, bodies which are established or constituted “under a statute” are
different from bodies which are “formed and registered” under a statute.
Companies and Societies registered under the respective Acts are merely bodies
“formed and registered” under these Acts and cannot be treated as “established
or constituted” under these Acts. Therefore companies or societies would fall
outside the scope of clause (25 a)(i) of Section 65 of Finance Act. In other words,
any body formed and registered as a company or society which provides services,
facilities or advantages for a subscription or any other amount to its members is
liable to pay service tax under section 65(25a) of the Finance Act, 1994.

     Taxable services are defined as services provided to members by clubs or
                          o
associations in relation t provision of services, facilities or advantages for a
subscription or any other amount. Facilities or advantages are provided to
members in return for a subscription or other consideration. The scope of the
term any other amount is the amount paid by mem    bers, apart from membership
fee or recurring subscription fee, such as amounts paid for provisions of services
to the guests of a member, amount paid for get-togethers and functions charged
                                                                    o
over and above the subscription amount. This will also be liable t service tax.
However, amount charged by club to its members for sale of items such as food
or beverages would not be taxable provided the documents evidencing such sale
are available.

      Any additional fee should be treated in the same way as subscription. Life
membership fees must be treated in the same way as subscription. In certain
professions, persons cannot practice unless they are registered with a statutory
body and have paid fees which are prescribed by law. In such cases, the
organization is not providing any service in the course of its business and it is
merely carrying statutory functions. Since no service is provided, the question of
levy of service tax does not arise. However, if there is no statutory requirement,
service tax is liable to be paid.
 (Ref: Board’s Circular No. F.No.B1/ 6 /2005-TRU dated 27.07.2005)

                               General Exemptions:
Sr.No.      Notification No.                    Nature of exemption
  1            16/2002           Services provided to United nations or any
                                 International Organisation
                                 Exemption to v  alue of goods and material sold
   2           12/2003           during the course of providing taxable service,
                                 subject to conditions laid down in the notification.
   3            4/2004           Service provided to a developer of Special
                                 Economic Zone or Unit located in SEZ
                                 Exemption from service tax for taxable services
   4            6/2005           upto gross value of Rs. 4 lakhs, in case of service
                                 providers whose gross turnover for the preceding
                                 financial year was less than Rs. 4 lakhs ( w.e.f
                                 01.04.2005)
                                    DREDGING

Date of Introduction: 16.06.2005 vide Notification NO.15/2005 dated
                              07.06.2005
Definitions:
        “dredging” includes removal of material including, silt, sediments, rocks,
sand, refuse, debris, plant or animal matter in any excavating, cleaning,
deepening, widening or lengthening, either permanently or temporarily, of any
river, port, harbour, backwater or estuary; (section 65(36a))
        “taxable service” means any service provided or to be provided to any
person, by any other person, in relation to dredging;; (section 65(105)(zzzb))

Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006

Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cases, where
the provider of taxable service is located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
read with Taxation of Services (Provided from outside India and received in India)
Rules, 2006
Scope of Service:
Any service provided or to be provided to any person, by any other person, in
relation to dredging is leviable to service tax under sub-clause (zzzb) of section
65(105) of the Finance Act, 1994. ‘Dredging’ has been defined under clause (36a)
of section 65 of the Finance Act, 1994.

    This taxable service covers dredging which is generally un          dertaken for
removal of material such as silt, sediments, rocks etc. of rivers, ports, harbour,
backwater or estuary for providing adequate draught for ships and other vessels
and to maintain shipping channels. Service tax is leviable only on dredging of
river, port, harbour, backwater or estuary and dredging in any other cases does
not attract service tax. The definition of dredging is an inclusive definition and the
activities specified are only indicative and not exhaustive.
(Ref: Board’s Circular No. F.No.B1/ 6 /2005-TRU dated 27.07.2005)

                               General Exemptions:
Sr.No.      Notification No.                    Nature of exemption
  1            16/2002           Services provided to United nations or any
                                 International Organisation
                                 Exemption to value of goods and material sold
   2            12/2003          during the course of providing taxable service,
                                 subject to conditions laid down in the notification.
   3             4/2004          Service provided to a developer of Special
                                 Economic Zone or Unit located in SEZ
                                 Exemption from service tax for taxable services
   4             6/2005          upto gross va lue of Rs. 4 lakhs, in case of service
                                 providers whose gross turnover for the preceding
                                 financial year was less than Rs. 4 lakhs ( w.e.f
                                 01.04.2005)
                MAILING LIST COMPILATION AND MAILING

Date of Introduction: 16.06.2005 vide Notification NO.15/2005 dated
                         07.06.2005

Definitions:
       “mailing list compilation and mailing” means any service in relation to —

(i) compiling and providing list of name, address and any other information from
any source; or

(ii) sending document, information, goods or any other material in a packet, by
whatever name called, by addressing, stuffing, sealing, metering or mailing,for,
or on behalf of, the client; (section 65(63a))

       “taxable service” means any service provided or to be provided to any
                             n
person, by any other person, i relation to mailing list compilation and mailing;
(section 65(105)(zzzg))

Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006

Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cases, where
the provider of taxable service is located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
read with Taxation of Services (Provided from outside India and received in India)
Rules, 2006

Scope of Service:
Any service provided or to be provided to any person, by any other person, in
relation to mailing list compilation and mailing is taxable under sub-clause (zzzg)
                                                                               l
of section 65(105) of the Finance Act, 1994. “Mailing list compilation and maiing”
has been defined under clause (63a) of section 65 of the Finance Act, 1994.

       Business establishments such as banks, insurance companies, companies
listed on stock exchanges, real estate agents and other similar commercial
entities engage the services of persons who compile and provide lists of names,
addresses and other information from telephone directories, internet or any other
source of information for the benefit of the business. Some agencies also provide
services of sending documents, mat     erials, information or any other goods by
addressing, stuffing, sealing, metering or mailing the envelope or packet for or on
behalf of the client. Such services are taxable under this category of service. Mail
order business companies may engage the services of mailing companies to
despatch goods to customers. Such mailing companies are also covered under
this service.

Ref: Board’s Circular No. F.No.B1/ 6 /2005-TRU dated 27.07.2005)
                            General Exemptions:

Sr.No.   Notification No.                    Nature of exemption
  1         16/2002           Services provided to United nations or any
                              International Organisation
                              Exemption to value of goods and material sold
  2         12/2003           during the course of providing taxable service,
                              subject to conditions laid down in the notification.
  3          4/2004           Service provided to a developer of Special
                              Economic Zone or Unit located in SEZ
                              Exemption from service tax for taxable services
  4          6/2005           upto gross value of Rs. 4 lakhs, in case of service
                              providers whose gross turnover for the preceding
                              financial year was less than Rs. 4 lakhs ( w.e.f
                              01.04.2005)
                                  PACKAGING

Date of Introduction: 16.06.2005 vide Notification NO.15/2005 dated
                         07.06.2005

Definitions:
        “packaging activity” means packaging of goods including pouch filling,
bottling, labelling or imprinting of the package, but does not include any
packaging activity that amounts to ‘manufacture’ within the meaning of clause (f)
                                                                         )
of section 2 of the Central Excise Act, 1944 (1 of 1944); (section 65(76b)

      “taxable service” means any service provided or to be provided to any
person, by any other person, in relation to packaging activity; (section
65(105)(zzzf))

Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006

Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cases, where
the provider of taxable service is located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
read with Taxation of Services (Provided from outside India and received in India)
Rules, 2006

Scope of Service:

Any service provided or to be provided to any person, by any other person, in
relation to packaging activity is taxable under sub-clause (zzzf) of section
65(105) of the Finance Act, 1994. “Packaging activity” has been defined under
clause (76b) of section 65 of the Finance Act, 1994.

This taxable service would cover packaging activity undertaken by a person for
any other person. These kinds of packaging services may be done for
pharmaceuticals (aseptic packaging), fragile goods, heavy machinery and
hardware, using variety of automated or manual packaging techniques, including
blister forming, and packaging, shrink or skin wrapping, form filling and sealing,
pouch filling, bottling or aerosol packaging. This service also includes labeling or
imprinting of the package. However, packaging activity which amounts to
manufacture within the definition of section 2(f) of Central Excise Act, 1944 would
not be liable to service tax. Service tax would be leviable on the gross amount
charged for rendering the packaging services.

                       (Ref: Board’s Circular No. F.No.B1/ 6 /2005-TRU
                     dated 27.07.2005)


                               General Exemptions:

Sr.No.      Notification No.                    Nature of exemptio n
  1            16/2002           Services provided to United nations or any
                                 International Organisation
                                 Exemption to value of goods and material sold
2   12/2003   during the course of providing taxable service,
              subject to conditions laid down in the notification.
3   4/2004    Service provided to a developer of Special
              Economic Zone or Unit located in SEZ
              Exemption from service tax for taxable services
4   6/2005    upto gross value of Rs. 4 lakhs, in case of service
              providers whose gross turnover for the preceding
              financial year was less than Rs. 4 lakhs ( w.e.f
              01.04.2005)
                   RESIDENTIAL COMPLEX CONSTRUCTION


Date of Introduction: 16.06.2005 vide Notification NO.15/2005 dated
                              07.06.2005
Definitions:
         “residential complex” means any complex comprising of     —
(i) a building or buildings, having more than twelve residential units;
(ii) a common area; and
(iii) any one or more of facilities or services such as park, lift, parking space,
community hall, common water supply or effluent treatment system,
located within a premises and the layout of such premises is approved by an
authority under any law for the time being in force, but does not include a
complex which is constructed by a person directly engaging any other person for
designing or planning of the layout, and the construction of such complex is
intended for personal use as residence by such person.
Explanation. — For the removal of doubts, it is hereby declared that for the
purposes of this clause, —
(a) “personal use” includes permitting the complex for use as residence by
another person on rent or without consideration;
(b) “residential unit” means a single house or a single apartment intended for use
as a place of residence; (section 65(91a))
         “construction of complex” means —
construction of a new residential complex or a (a) part thereof; or
completion and finishing services in relation (b) to residential complex such as
glazing, plastering, painting, floor and wall tiling, wall covering and wall papering,
wood and metal joinery and carpentry, fencing and railing, construction of
swimming pools, acoustic applications or fittings and other similar services; or
repair, alteration, renovation or restoration (c) of, or similar services in relation
to, residential complex; (section 65(30a))

        “taxable service” means any service provided or to be provided to any
person, by any other person, in relation to construction of complex; (section
65(105)(zzzh))
Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006
Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cases, where
the provider of taxable service is located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
read with Taxation of Services (Provided from outside India and received in India)
Rules, 2006
Scope of Service:
Any service provided or to be provided to any person, by any other person, in
relation to construction of complex is taxable under sub-clause (zzzh) of section
65(105) of the Finance Act, 1994. “Construction of complex” has been defined
under clause (30a) of section 65 of the Finance Act, 1994. ‘Residential complex”
has been defined under clause (91a) of section 65 of the Finance Act, 1994.
       Construction of new building or civil structures used for commercial or
industrial purposes and repair, alteration or restoration activities of such buildings
or civil structures is liable to service tax since 2004. In this year’s budget the
construction of new residential complex or a part thereof is also covered under
service tax. The term of “construction of complex” is defined under section 65
(30a) of the Finance Act 1994. It covers,-
    construction of a new residential complex;
                                                            d
    completion and finishing services in relation to a resi ential complex, whether
or not new;
    repair, alteration, etc. in relation to residential complex, whether or not new.

     This service would generally cover construction services in respect of
                                                           s
residential complexes developed by builders, promoter or developers. Such
residential complexes are normally constructed after obtaining approval of the
statutory authority for their layout. For the purpose of this levy, residential
complex means,-
(i) a building or buildings located within a premises;
(ii) total number of residential units within the said premises are more than
twelve;
(iii) having common area;
(iv) having common facilities or services; and
(v) layout of the premises has been approved by the appropriate authority.
Common area would include roads, staircases and other similar areas where
residents of the residential complex have easement rights. The list of facilities
prescribed is merely illustrative and not exhaustive. Some residential complexes
may also contain other facilities such as market or shopping complex, schools,
security, banks, gymnasium, health club, sports facilities, power back up and the
like.

     However, residential complex having only 12 or less residential units would
not be taxable. Similarly, residential complex constructed by an individual, which
is intended for personal use as residence and is constructed by directly availing
services of a construction service provider, is also not covered under the scope of
the service tax and not taxable.

   Post construction, completion and finishing services such as glazing,
plastering, painting, floor and wall tiling, wall covering and wall papering, wood
and metal joinery and carpentry and similar services done in relation to a
residential complex, whether or not new, w        ould be included as part of the
construction activity of residential complexes for the purpose of levy of service
tax.

     The taxable service is the service provided in relation to construction of a
residential complex. Service tax would be payable only on the gross amount
charged by the service provider for the construction service provided and it would
not include the cost of land and stamp duty paid for registration of land.
However, notification No. 18/2005 –ST dated 7/6/05 provides option to avail
abatement and pay service tax only on 33% of the gross amount charged,
subject to fulfilment of conditions specified in the notification.

    Repair, alteration, renovation or restoration of residential complexes would
also be liable to service tax. Such services provided in relation to residential
complexes which are in existence before the levy has come into force and are not
new would also be liable to be taxed.

(Ref: Board’s Circular No. F.No.B1/ 6 /2005-TRU dated 27.07.2005)


                               General Exemptions:

Sr.No.      Notification No.                    Nature of exemption
  1            16/2002           Services provided to United nations or any
                                 International Organisation
                                 Exemption to value of goods and material sold
2   12/2003   during the course of providing taxable service,
              subject to conditions laid down in the notification.
3   4/2004    Service provided to a developer of Special
              Economic Zone or Unit located in SEZ
              Exemption from service tax for taxable services
4   6/2005    upto gross value of Rs. 4 lakhs, in case of service
              providers whose gross turnover for the preceding
              financial year was less than Rs. 4 lakhs ( w.e.f
              01.04.2005)
                              SITE PREPARATION

Date of Introduction: 16.06.2005 vide Notification NO.15/2005 dated
                       07.06.2005

Definitions:
         “site formation and clearance, excavation and earthm          oving and
demolition” includes,
(i) drilling, boring and core extraction services for construction, geophysical,
geological or similar purposes; or
(ii) soil stabilization; or
(iii) horizontal drilling for the passage of cables or drain pipes; or
(iv) land reclamation work; or
(v) contaminated top soil stripping work; or
(vi) demolition and wrecking of building, structure or road,
but does not include such services provided in relation to agriculture, irrigation,
watershed development and drilling, digging, repairing, renovating or restoring of
water sources or water bodies; (section 65(97a))
         “taxable service” to any person, by any other person, in relation to site
formation and clearance, excavation and earthmoving and demolition and such
other similar activities; (section 65(105)(zzza))

Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006

Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cases, where
the provider of taxable service is located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
read with Taxation of Services (Provided from outside India and received in India)
Rules, 2006
Scope of Service:
                                          e
        Any service provided or to b provided to any person, by any other
person, in relation to site formation and clearance, excavation and earthmoving
and demolition and such other similar activities is leviable to service tax under
sub-clause (zzza) of section 65(105) of the Finance Act, 1994. “Site formation
and clearance, excavation and earthmoving and demolition” has been defined in
clause (97a) of section 65 of the Finance Act, 1994.
       The definition of site formation and clearance, excavation and earthmoving
and demolition is an inclusive definition and the activities specifically mentioned
are indicative and not exhaustive. Prior to construction of buildings, factory or
any civil structure, activity of mining or laying of cables or pipes, preparation
services of site formation and clearance, excavation and earthmoving or leveling
are normally undertaken for a consideration to make the land suitable for such
activities. Such services include blasting and rock removal work, clearance of
undergrowth, drilling and boring, overburden removal and other development and
preparation services of mineral properties and sites, and other similar excavating
and earthmoving services. Demolition of structures, buildings, streets or
                                                                     o
highways is also undertaken for a consideration as a preparat ry activity for
subsequent construction activity or for clearing the site for any other purpose. All
such activities fall within the scope of this service.
      However, site formation and clearance, excavation and earthmoving and
demolition services when provided in relation to agriculture, irrigation, watershed
development and drilling, digging, repairing, renovating or restoring of water
sources or water bodies are specifically excluded and not within the scope of this
service.
                         (Ref: Board’s Circular No. F.No.B1/ 6 /2005-TRU
                     dated 27.07.2005)

Service-specific Exemption:
Notification 17/2005-ST dated 07.06.2005 exempts this service provided in the
course of construction of roads, airports, railways, transport terminals, bridges,
tunnels, dams, major and minor ports.

General Exemptions:
Sr.No.    Notification No.                     Nature of exemption
  1          16/2002            Services provided to United nations or any
                                International Organisation
                                Exemption to value of goods and material sold
   2           12/2003                               f
                                during the course o providing taxable service,
                                subject to conditions laid down in the notification.
   3            4/2004          Service provided to a developer of Special
                                Economic Zone or Unit located in SEZ
                                Exemption from service tax for taxable services
   4            6/2005          upto gross value of Rs. 4 lakhs, in case of service
                                providers whose gross turnover for the preceding
                                financial year was less than Rs. 4 lakhs ( w.e.f
                                01.04.2005)
                          SURVEY AND MAP MAKING

Date of Introduction: 16.06.2005 vide Notification NO.15/2005 dated
                              07.06.2005
Definitions:
       “survey and map-making” means geological, geophysical or any other
prospecting, surface, sub-surface or aerial surveying or map-making of any kind,
but does not include survey and exploration of mineral; (section 65(104b))
       “taxable service” means any service provided or to be provided to any
person, by any other person, other than by an agency under the control of, or
authorised by, the Government, in relation to survey and map-making; (section
65(105)(zzzc))

Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006

Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cases, where
the provider of taxable s  ervice is located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
read with Taxation of Services (Provided from outside India and received in India)
Rules, 2006
Scope of Service:
Any service provided or to be provided to any person, by any other person, other
than by an agency under the control of, or authorised by, the Government, in
relation to survey and map-making is taxable under sub-clause (zzzc) of section
65(105) of the Finance Act, 1994. ‘Survey and map-making’ has been defined
under clause (104b) of section 65 of the Finance Act, 1994.

    This service covers geological, geophysical, geochemical and other
prospecting services by studying the properties of the earth and rock formation
and structures. It also includes services providing information on sub-surface
earth formations by different methods such as seismographic, gravimetric,
magnetometric methods or other sub-surface surveying methods.

     Further, it covers surface surveying, services of gathering information on the
shape, position or boundaries of a portion of earth’s surface by methods such as
transit, photogrammetric, or hydrographic, for the purpose of preparing maps. It
also includes surveying or collection of data by satellites.

      ‘Survey and exploration of minerals’, which is a taxable service under sub-
clause (zzv) of section 65(105) since 2004, covers specified services rendered in
relation to location or exploration of deposits of mineral, oil or gas. The new
taxable service of ‘survey and map-making’ classifiable under sub-clause (zzzc) of
section 65(105) of the Finance Act, 1994, covers other such activities excluding
“survey and exploration of minerals” classifiable under sub-clause (zzv) of
section 65(105) since 2004 .

                                                                ll
     Map making consists of preparation or revision of maps of a kinds such as
topographic, hydrographic, roads, planimetric, cadastral, city maps etc. using
various information sources.
     However, survey and map-making services rendered by an agency under the
control of the Government or authorised by the Government, such as ‘Survey of
India’ are specifically excluded and are outside the scope of this service.
                           (Ref: Board’s Circular No. F.No.B1/ 6 /2005      -TRU
                       dated 27.07.2005)

General Exemptions:
Sr.No.    Notification No.                    Nature of exemption
  1          16/2002           Services provided to United nations or any
                               International Organisation
                               Exemption to value of goods and material sold
   2           12/2003         during the course of providing taxable service,
                               subject to conditions laid down in the notification.
   3           4/2004          Service provided to a developer of Special
                               Economic Zone or Unit located in SEZ
                               Exemption from service tax for taxable services
   4           6/2005          upto gross value of Rs. 4 lakhs, in case of service
                               providers whose gross turnover for the preceding
                                                          h
                               financial year was less t an Rs. 4 lakhs ( w.e.f
                               01.04.2005)
                       TRANSPORT OF GOODS BY ROAD


Date of Introduction: 01.01.2005

Definitions:
        “goods carriage” has the meaning assigned to it in clause (14 ) of section
2 of the Motor Vehicles Act, 1988(59 of 1988). Section 65 (50a)of the Finance
Act, 1994
        “goods transport agency” means any person who provides service in
relation to transport of goods by road and issues consignment note, by whatever
name called Section 65 (50b)of the Finance Act, 1994
        “taxable service” means any service provided to a customer, by a goods
transport agency, in relation to transport of goods by road in a goods carriage.
Section 65(105)(zzp)of the Finance Act, 1994

Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006
 ( For provisions relating to abatement please see ‘Exemptions’)

Who is responsible to pay Service Tax:
The service provider is responsible for payment of Service Tax. (Section 68 of
Finance Act, 1994). However, in relation to taxable service provided by a goods
transport agency, where the consignor or consignee of goods is,-

(a) any factory registered under or governed by the Factories Act, 1948 (63 of
1948);
(b) any company established by or under the Companies Act, 1956 (1 of 1956);
(c) any corporation established by or under any law;
(d) any society registered under the Societies Registration Act, 1860 (21 of 1860)
or under any law corresponding to that Act in force in any part of India;
(e) any co-operative society established by or under any law;
(f) any dealer of excisable goods, who is registered under the Central Excise Act,
1944 (1 of 1944) or the rules made there under; or
(g) any body corporate established, or a partnership firm registered, by or under
any law,
any person who pays or is liable to pay freight either himself or through his agent
for the transportation of such goods by road in a goods carriage;”
Scope of Service:
The scope of the service covers any service provided by the goods transport
agency in relation to transport of goods by road in goods carriage. Goods
Transport Agency is any person who provides service in relation to transport of
goods and issues a consignment note ( by whatever name it is called). The
consignment note should be serially numbered and it should contain name and
address of the consignee and consignor, registration number of the goods
carriage in which the goods are transported, details of the goods transported,
details of the place of origin and destination, person liable for paying service tax,
whether consignee or consignor or the goods transport agency.
Exemptions:
1. Notification No.32/2004 dated 03.12.2004 – Abatement of 75% on the gross
    amount charged for providing the service, subject to the condition that no
    credit of inputs or capital goods is availed while providing such service. This
    Notification has been rescinded vide Notification No.2/2006 dated
    01.03.2006. However, the same benefit of abatement is provided vide
    Notification No.1/2006 dated 01.03.2006
2. Notification No.33/2004 dated 03.12.2004 – Exemption to transport services
    rendered by an agency in relation to vegetables, fruits, eggs and milk
3. Notification No.34/2004 dated 03.12.2004 – Exemption to GTA – subject to
    condition that amount charged is Rs.750 / Rs.1500
       TRANSPORT OF GOODS THROUGH PIPELINE OR OTHER CONDUIT


Date of Introduction: 16.06.2005 vide Notification No.15/2005 dated
                         07.06.2005

Definitions:
       “taxable service” means any service provided to any person, by any other
person, in relation to transport of goods other than water, through pipeline or
other conduit (section 65(105)(zzz))

Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006
Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cases, where
the provider of taxable service is located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
read with Taxation of Services (Provided from outside India and received in India)
Rules, 2006
Scope of Service:
Transportation of goods, other than water, through pipeline or conduit is
generally employed to transport petroleum and other petroleum products, natural
gas, LPG, chemicals, coal slurry and o      ther similar products. Such transport
services are liable to service tax under sub-clause (zzz) of section 65(105) of the
Finance Act, 1994. Consideration for the said transportation service provided may
be payable periodically or from time to time. The service provider is required to
pay service tax as and when payment is received for the services provided or to
be provided.
                      (Ref: Board’s Circular No. F.No.B1/ 6 /2005-TRU
                      dated 27.07.2005)

General Exemptions:
Sr.No.    Notification No.                     Nature of exemption
  1          16/2002            Services provided to United nations or any
                                International Organisation
                                Exemption to value of goods and material sold
   2           12/2003          during the course of providing taxable service,
                                subject to conditions laid down in the notification.
   3            4/2004          Service provided to a developer of Special
                                Economic Zone or Unit located in SEZ
                                Exemption from service tax for taxable services
   4            6/2005          upto gross value of Rs. 4 lakhs, in case of service
                                providers whose gross turnover for the preceding
                                financial year was le ss than Rs. 4 lakhs ( w.e.f
                                01.04.2005)
  AIR TRANSPORT SERVICE OF ANY PASSENGER EMBARKING IN INDIA
    FOR INTERNATIONAL JOURNEY (OTHER THAN ECONOMY CLASS)


Date of Introduction: 01.05.2006 vide Notification No.15/2006 dated
                        25.04.2006

Definitions:
       “international journey”, in relation to a passenger, means his journey from
any customs airport on board any aircraft to a place outside India; (section
65(56a) of the Finance Act, 1994)
       “customs airport” means an airport appointed as such under clause (a) of
subsection (1) of section 7 of the Customs Act, 1962; ( section 65(35a0 of the
Finance Act, 1994)
       “taxable service” means any service provided or to be provided to any
passenger, by an aircraft operator, in relation to scheduled or non-scheduled air
transport of such passenger embarking in India for international journey, in any
class other than economy class.
Explanation 1.—For the purposes of this sub-clause, economy class in an aircraft
meant for scheduled air transport of passengers means,    —
(i) where there is more than one class of travel, the class attracting the lowest
standard fare; or
(ii) where there is only one class of travel, that class.
Explanation 2.—For the purposes of this sub-clause, in an aircraft meant for non
scheduled air transport of passengers, no class of travel shall be treated as
economy class; (section 65(105)(zzzo) of Finance Act, 1994)
Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006

Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cases, where
the provider of taxable service is located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
read with Taxation of Services (Provided from outside India and received in India)
Rules, 2006
Scope of Service:
Liability to pay service tax is on the aircraft operator who is the service provider.
Economy class passengers are excluded from the levy of service tax under this
sub-clause. Transit passengers not leaving the customs area will not be covered
under this sub-clause.
(Ref: Joint Secretary (TRU)’s letter D.O.F.No. 334/4/2006-TRU dated
28.02.2006)

General Exemptions:
Sr.No.    Notification No.                      Nature of exemption
  1          16/2002             Services provided to United nations or any
                                 International Organisation
                                 Exemption to value of goods and material sold
   2            12/2003          during the course of providing taxable service,
                                 subject to conditions laid down in the notification.
   3            4/2004           Service provided to a developer of Special
                                 Economic Zone or Unit located in SEZ
                                 Exemption from service tax for taxable services
4   6/2005   up to gross value of Rs. 4 lakhs, in case of
             service providers whose gross turnover for the
             preceding financial year was less than Rs. 4 lakhs
             ( w.e.f 01.04.2005)
            ATM OPERATIONS, MAINTENANCE OR MANAGEMENT


Date of Introduction: 01.05.2006 vide Notification No.15/2006 dated
                        25.04.2006

Definitions:
        “automated teller machine” means an interactive automatic machine
designed to dispense cash, accept deposit of cash, transfer money between bank
accounts and facilitate other financial transactions; (section 65(9a) of the Finance
Act, 1994)
         “automated teller machine operations, maintenance or management
service” means any service provided in relation to automated teller machines and
includes site selection, contracting of location, acquisition, financing, installation,
certification, connection, maintenance, transaction processing, cash forecasting,
replenishment, reconciliation and value-added services; (section 65(9b) of the
Finance Act, 1994)
        “taxable service” means any service provided or to be provided to any
person, by any other person, in relation to automated teller machine operations,
maintenance or management service, in any manner (section 65(105)(zzzk))

Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006

Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cases, where
the provider of taxable service is located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
read with Taxation of Services (Provided from outside India and received in India)
Rules, 2006
Scope of Service:
ATMs (Automated Teller Machines) may be owned by banks and other financial
institutions who outsource a number of activities related to ATMs such as
operations, maintenance or management of hardware and soft ware, cash
replenishment etc. In other cases, there is comprehensive outsourcing of entire
ATM related services. Such outsourced services are taxable under this category.
Some of the specific areas of outsourcing are mentioned in the definition of ATM
ope rations, maintenance or management
(Ref: Joint Secretary (TRU)’s letter D.O.F.No. 334/4/2006-TRU dated
28.02.2006)

General Exemptions:
Sr.No.    Notification No.                       Nature of exemption
  1          16/2002              Services provided to United nations or any
                                  International Organisation
                                  Exemption to value of goods and material sold
   2            12/2003           during the course of providing taxable service,
                                  subject to conditions laid down in the notification.
   3             4/2004           Service provided to a developer of Special
                                  Economic Zone or Unit located in SEZ
                                  Exemption from service tax for taxable services
   4             6/2005           upto gross value of Rs. 4 lakhs, in case of service
                                  providers whose gross turnover for the preceding
financial year was less than Rs. 4 lakhs ( w.e.f
01.04.2005)
                            AUCTIONEERS’ SERVICE


Date of Introduction: 01.05.2006 vide Notification No.15/2006 dated
                        25.04.2006

Definitions:
       “auction of property” includes calling the auction or providing a facility,
advertising or illustrating services, pre-auction price estimates, short-term
storage services, repair or restoration services in relation to auction of property;
(section 65(7a) of the Finance Act, 1994)
               “taxable service” means any service provided or to be provided to
any person, by any other person, in relation to auction of property, movable or
immovable, tangible or intangible, in any manner, but does not include auction of
property under the directions or orders of a court of law or auction by the
Government; (section 65(105)(zzzr) of the Finance Act, 1994)
Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006

Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cases, where
the provider of taxable service is located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
                                                                d
read with Taxation of Services (Provided from outside India an received in India)
Rules, 2006

Scope of Service:
A seller of property normally enters into an agreement with an auctioneer to
conduct the auction for a consideration. However, services provided in relation
to auction of property under direction or orders of a Court of Law or auction by
the Government are not taxable.
(Ref: Joint Secretary (TRU)’s letter D.O.F.No. 334/4/2006-TRU dated
28.02.2006)


General Exemptions:
Sr.No.    Notification No.                      Nature of exemption
  1          16/2002             Services provided to United nations or any
                                 International Organisation
                                 Exemption to value of goods and material sold
   2            12/2003          during the course of providing taxable service,
                                 subject to conditions laid down in the notification.
   3            4/2004           Service provided to a developer of Special
                                 Economic Zone or Unit located in SEZ
                                 Exemption from service tax for taxable services
   4            6/2005           upto gross value of Rs. 4 lakhs, in case of service
                                 providers whose gross turnover for the preceding
                                 financial year was less than Rs. 4 lakhs ( w.e.f
                                 01.04.2005)
                          BUSINESS SUPPORT SERVICE

Date of Introduction: 01.05.2006 vide Notification No.15/2006 dated
                        25.04.2006

Definitions:
        “support services of business or commerce” means services provided in
relation to business or commerce and includes evaluation of prospective
customers, telemarketing, processing of purchase orders and fulfilment services,
information and tracking of delivery schedules, managing distribution and
logistics, customer relationship management services, accounting and processing
o f transactions, operational assistance for marketing, formulation of customer
service and pricing policies, infrastructural support services and other transaction
processing.
Explanation.—For the purposes of this clause, the expression “infrastructural
support services” includes providing office along with office utilities, lounge,
reception with competent personnel to handle messages, secretarial services,
internet and telecom facilities, pantry and security; (section 65(104c) of the
Finance Act, 1994)
                “taxable service” means any service provided or to be provided to
any person, by any other person, in relation to support services of business or
commerce, in any manner; (section 65(105)(zzzq) of the Finance Act, 1994)
Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006

 Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cases, where
the provider of taxable service is located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
read with Taxation of Services (Provided from outside India and received in India)
Rules, 2006
Scope of Service:
Business entities outsource a number of services for use in business or
commerce. These services include transaction processing, routine administration
or accountancy, customer relationship management and tele-marketing. There
are also business entities which provide infrastructural support such as providing
instant offices along with secretarial assistance known as “Business Centre
Services”. It is proposed to tax all such outsourced services. If these services are
provided on behalf of a person, they are already taxed under Business Auxiliary
                                                                  ce
Service. Definition of support services of business or commer gives indicative
list of outsourced services.
(Ref: Joint Secretary (TRU)’s letter D.O.F.No. 334/4/2006-TRU dated
28.02.2006)


General Exemptions:
Sr.No.    Notification No.                      Nature of exemption
  1          16/2002             Services provided to United nations or any
                                 International Organisation
                                 Exemption to value of goods and material sold
   2            12/2003          during the course of providing taxable service,
                                 subject to conditions laid down in the notification.
   3            4/2004           Service provided to a developer of Special
             Economic Zone or Unit located in SEZ
             Exemption from service tax for taxable services
4   6/2005   upto gross value of Rs. 4 lakhs, in case of service
             providers whose gross turnover for the preceding
             financial year was less than Rs. 4 lakhs ( w.e.f
             01.04.2005)
 CREDIT CARD, DEBIT CARD, CHARGE CARD OR OTHER PAYMENT CARDS
                        RELATED SERVICE


Date of Introduction: 01.05.2006 vide Notification No.15/2006 dated
                        25.04.2006

Definitions:
         “credit card, debit card, charge card or other payment card service”
includes any
service provided,—
 (i) by a banking company, financial institution including non-banking financial
company
or any other person (hereinafter referred to as the issuing bank), issuing such
card to a card holder;
                                                                  d
(ii) by any person to an issuing bank in relation to such car business, including
receipt and processing of application, transfer of embossing data to issuing bank’s
personalisation agency, automated teller machine personal identification number
generation, renewal or replacement of card, change of address, enhancement of
credit limit, payment updation and statement generation;
(iii) by any person, including an issuing bank and an acquiring bank, to any other
person in relation to settlement of any amount transacted through such card.
Explanation.—For the purposes of this sub-clause, “acquiring bank” means any
banking company, financial institution including non-banking financial company or
any other person, who makes the payment to any person who accepts such card;
(iv) in relation to joint promotional cards or affinity cards or co-branded cards;
(v) in relation to promotion and marketing of goods and services through such
card;
(vi) by a person, to an issuing bank or the holder of such card, for making use of
automated teller machines of such person; and
(vii) by the owner of trade marks or brand name to the issuing bank under an
agreement, for use of the trade mark or brand name and other services in
relation to such card, whether or not such owner is a club or association and the
issuing bank is a member of such club or association.
Explanation.—For the purposes of this sub-clause, an issuing bank and the owner
of trade marks or brand name shall be treated as separate persons;’ (section
65(33a) of the Finance Act, 1994)
         “taxable service” means any service provided or to be provided to to any
person, by any other person, in relation to credit card, debit card, charge card or
other payment card service, in any manner; (section 65(105)(zzzw) of the
Finance Act, 1994)
Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006

Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cases, where
                                    i
the provider of taxable service s located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
read with Taxation of Services (Provided from outside India and received in India)
Rules, 2006
Scope of Service:
Credit card services are presently taxable under banking and other financial
services. The proposal is to tax comprehensively all services provided in respect
of, or in relation to, credit card, debit card, charge card or other payment card in
any manner. The major services provided in relation to such services are
specifically mentioned under the definition “credit card, debit card, charge card or
other payment card service”.
(Ref: Joint Secretary (TRU)’s letter D.O.F.No. 334/4/2006-TRU dated
28.02.2006)

General Exemptions:
Sr.No.    Notification No.                      Nature of exemption
  1          16/2002             Services provided to United nations or any
                                 International Organisation
                                 Exemption to value of goods and material sold
   2            12/2003          during the course of providing taxable service,
                                 subject to conditions laid down in the notification.
   3            4/2004           Service provided to a developer of Special
                                 Economic Zone or Unit located in SEZ
                                 Exemption from service tax for taxable services
   4            6/2005           upto gross value of Rs. 4 lakhs, in case of service
                                 providers whose gross turnover for the preceding
                                 financial year was less than Rs. 4 lakhs ( w.e.f
                                 01.04.2005)
                             INTERNET TELEPHONY


Date of Introduction: 01.05.2006 vide Notification No.15/2006 dated
                        25.04.2006

Definitions:
       internet telephony” means telecommunication service through internet and
includes fax, audio conferencing and video conferencing; (section 65(57a) of the
Finance Act, 1994)
       “taxable service” means any service provided or to be provided to any
person, by any other person, in relation to internet telephony; (section
65(105)(zzzu) of the Finance Act, 1994)
Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006

Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cases, where
the provider of taxable service is located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
read with Taxation of Services (Provided from outside India and received in India)
Rules, 2006

Scope of Service:
Presently internet telephony services are taxable under
“Online information and data base access and or retrieval services”. Proposal is
to create a separate service under the name ‘Internet Telephony Service’.
(Ref: Joint Secretary (TRU)’s letter D.O.F.No. 334/4/2006-TRU dated
28.02.2006)


General Exemptions:
Sr.No.    Notification No.                     Nature of exemption
  1          16/2002            Services provided to United nations or any
                                International Organisation
                                Exemption to value of goods and material sold
   2           12/2003          during the course of providing taxable service,
                                subject to conditions laid down in the notification.
   3            4/2004          Service provided to a developer of Special
                                Economic Zone or Unit located in SEZ
                                Exemption from service tax for taxable services
   4            6/2005          upto gross value of Rs. 4 lakhs, in case of service
                                providers whose gross turnover for the preceding
                                financial year was less than Rs. 4 lakhs ( w.e.f
                                01.04.2005)
                          PUBLIC RELATIONS SERVICE


Date of Introduction: 01.05.2006 vide Notification No.15/2006 dated
                        25.04.2006

Definitions:
        “public relations” includes strategic counseling based on industry, media
and perception research, corporate image management, media relations, media
training, press release, press conference, financial public relations, brand support,
brand launch, retail support and promotions, events and communications and
crisis communications; (section 65(86c) of the Finance Act, 1994)
               “taxable service” means any service provided or to be provided to
any person, by any other person, in relation to managing the public relations of
such person, in any manner (section 65(105)(zzzs) of the Finance Act, 1994)
Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006

Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cases, where
the provider of taxable service is located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
read with Taxation of Services (Provided from outside India and received in India)
Rules, 2006

Scope of Service:
Public relation agencies are engaged to provide services relating to image or
communication management. These services are proposed to be taxed. The term
“public relations” is defined.
(Ref: Joint Secretary (TRU)’s letter D.O.F.No. 334/4/2006-TRU dated
28.02.2006)

General Exemptions:
Sr.No.    Notification No.                      Nature of exemption
  1          16/2002             Services provided to United nations or any
                                 International Organisation
                                 Exemption to value of goods and material sold
   2            12/2003          during the course of providing taxable service,
                                 subject to conditions laid down in the notification.
   3            4/2004           Service provided to a developer of Special
                                 Economic Zone or Unit located in SEZ
                                 Exemption from service tax for taxable services
   4            6/2005           upto gross value of Rs. 4 lakhs, in case of service
                                 providers whose gross turnover for the preceding
                                 financial year was less than Rs. 4 lakhs ( w.e.f
                                 01.04.2005)
                               RECOVERY AGENT


Date of Introduction: 01.05.2006 vide Notification No.15/2006 dated
                        25.04.2006

Definitions:
       “taxable service” means any service provided or to be provided to a
banking company or a financial institution including a non-banking financial
company or any other body corporate or a firm, by any person, in relation to
recovery of any sums due to such banking company or financial institution,
including a non-banking financial company, or any other body corporate or a firm,
in any manner; (section 65(105)(zzzl))

Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006

Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cases, where
the provider of taxable service is located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
                                                                                 a
read with Taxation of Services (Provided from outside India and received in Indi )
Rules, 2006
Scope of Service:
Services provided for recovery of any sums due to a commercial or business
entity are covered under this category. Under Securities and Reconstruction of
Financial Assets and Enforcement of Security Act,2002 and the relevant rules
made there under, banks and other financial institutions appoint recovery agents.
(Ref: Joint Secretary (TRU)’s letter D.O.F.No. 334/4/2006-TRU dated
28.02.2006)

General Exemptions:
Sr.No.    Notification No.                     Nature of exemption
  1          16/2002            Services provided to United nations or any
                                International Organisation
                                Exemption to value of goods and material sold
   2           12/2003          during the course of providing taxable service,
                                subject to conditions laid down in the notification.
   3            4/2004          Service provided to a developer of Special
                                Economic Zone or Unit located in SEZ
                                Exemption from service tax for taxable services
   4            6/2005          upto gross value of Rs. 4 lakhs, in case of service
                                providers whose gross turnover for the preceding
                                                                      l
                                financial year was less than Rs. 4 akhs ( w.e.f
                                01.04.2005)
                           REGISTRAR TO AN ISSUE


Date of Introduction: 01.05.2006 vide Notification No.15/2006 dated
                        25.04.2006

Definitions:
         “registrar to an issue” means any person carrying on the activities in
relation to an issue including collecting application forms from investors, keeping
a record of applications and money received from investors or paid to the seller of
securities, assisting in determining the basis of allotment of securities, finalising
the list of persons entitled to allotment of securities and processing and
despatching allotment letters, refund orders or certificates and ot her related
documents;’ (section 65(89c) of the Finance Act, 1994)
        “taxable service” means any service provided or to be provided to any
person, by a registrar to an issue, in relation to sale or purchase of securities;
(section 65(105)(zzzi))

Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006

Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cases, where
the provider of taxable service is located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
read with Taxation of Services (Provided from outside India and received in India)
Rules, 2006
Scope of Service:
A person engaged by a body corporate and provides various services in respect of
sale or purchase of securities. These services include collection of application
forms, keeping of records, and assisting in allotment of securities. The service
providers are required to be registered under SEBI Rules. The details may be
obtained from the website of SEBI viz. sebi.gov.in.
(Ref: Joint Secretary (TRU)’s letter D.O.F.No. 334/4/2006-TRU dated
28.02.2006)

General Exemptions:
Sr.No.    Notification No.                      Nature of exemption
  1          16/2002             Services provided to United nations or any
                                 International Organisation
                                 Exemption to value of goods and material sold
   2            12/2003          during the course of providing taxable service,
                                 subject to conditions laid down in the notification.
   3            4/2004           Service provided to a developer of Special
                                 Economic Zone or Unit located in SEZ
                                 Exemption from service tax for taxable services
   4            6/2005           upto gross value of Rs. 4 lakhs, in case of service
                                 providers whose gross turnover for the preceding
                                 financial year was less than Rs. 4 lakhs ( w.e.f
                                 01.04.2005)
               SALE OF SPACE OR TIME FOR ADVERTISEMENT

Date of Introduction: 01.05.2006 vide Notification No.15/2006 dated
                        25.04.2006

Definitions:
                        “taxable service” means any service provided or to be
provided to any person, by any other person, in relation to sale of space or time
for advertisement, in any manner; but does not include sale of space for
advertisement in print media and sale of time slots by a broadcasting agency or
organisation.
Explanation 1.—For the purposes of this sub-clause, “sale of space or time for
advertisement” includes,—
(i) providing space or time, as the case may be, for display, advertising,
showcasing of any product or service in video programmes, television
programmes or motion pictures or music albums, or on billboards, public places,
buildings, conveyances, cell phones, automated teller machines, internet;
(ii) selling of time slots on radio or television by a person, other than a
broadcasting agency or organisation; and
(iii) aerial advertising.
Explanation 2.—For the purposes of this sub-clause, “print media” means “book”
and “newspaper” as defined in sub-section (1) of section 1 of the Press and
Registration of Books Act, 1867; (section 65(105)(zzzm))

Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006

Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cases, where
the provider of taxable service is located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
read with Taxation of Services (Provided from outside India and received in India)
Rules, 2006
Scope of Service:
Sale of media in television and radio by a broadcasting agency or organization is
taxable under Section 65(105)(zk). Services provided by
advertising agencies are taxable under Section 65(105)(e).
  This entry proposes to levy service tax on sale of time or space for
advertisement, excluding sale of space for advertisement in print media. Sale of
advertising time in television and radio by any person other than broadcasting
agency or organization is also covered under this sub-clause. Some of the other
modes of advertisement covered under this mode are internet advertisement,
advertisement on buildings, vehicles, etc., advertisement in motion pictures,
television serials, video and music albums, mobile phones, ATMs , films and
television serials (known as product placement).
It may be noted that advertisement in print media is excluded.
(Ref: Joint Secretary (TRU)’s letter D.O.F.No. 334/4/2006-TRU dated
28.02.2006)

General Exemptions:
Sr.No.    Notification No.                    Nature of exemption
  1          16/2002            Services provided to United nations or any
                                International Organisation
                                Exemption to value of goods and material sold
2   12/2003   during the course of providing taxable service,
              subject to conditions laid down in the notification.
3   4/2004    Service provided to a developer of Special
              Economic Zone or Unit located in SEZ
              Exemption from service tax for taxable services
4   6/2005    upto gross value of Rs. 4 lakhs, in case of service
              providers whose gross turnover for the preceding
              financial year was less than Rs. 4 lakhs ( w.e.f
              01.04.2005)
                           SHARE TRANSFER AGENT

Date of Introduction: 01.05.2006 vide Notification No.15/2006 dated
                        25.04.2006

Definitions:
       “share transfer agent” means any person who maintains the record of
holders of securities and deals with all matters connected with the transfer or
redemption of securities or activities incidental thereto;’ (section 65(95a) of the
Finance Act, 1994)
       “taxable service” means any service provided or to be provided to any
person,    by a share transfer agent, in relation to securities            (section
65(105)(zzzj))

Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006

Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cas   es, where
the provider of taxable service is located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
read with Taxation of Services (Provided from outside India and received in India)
Rules, 2006


Scope of Service:
A person who provides service to a body corporate. The services include
maintenance of the record of holders of securities and dealing with all matters
connected with transactions or redemption of securities. The service providers
are required to be registered under SEBI Rules. The details may be obtained from
the website of SEBI viz. sebi.gov.in.            (Ref: Joint Secretary (TRU)’s
letter D.O.F.No. 334/4/2006-TRU dated 28.02.2006)

General Exemptions:
Sr.No.    Notification No.                     Nature of exemption
  1          16/2002            Services provided to United nations or any
                                International Organisation
                                Exemption to value of goods and material sold
   2           12/2003          during the course of providing taxable service,
                                subject to conditions laid down in the notification.
   3            4/2004          Service provided to a developer of Special
                                Economic Zone or Unit located in SEZ
                                Exemption from service tax for taxable services
   4            6/2005          upto gross value of Rs. 4 lakhs, in case of service
                                providers whose gross turnover for the preceding
                                financial year was less than Rs. 4 lakhs ( w.e.f
                                01.04.2005)
                              SHIP MANAGEMENT


Date of Introduction: 01.05.2006 vide Notification No.15/2006 dated
                        25.04.2006

Definitions:
         ship management service” includes,—
(i) the supervision of the maintenance, survey and repair of ship;
(ii) engagement or providing of crews;
(iii) receiving the hire or freight charges on behalf of the owner;
(iv) arrangements for loading and unloading;
(v) providing for victualling or storing of ship;
(vi) negotiating contracts for bunker fuel and lubricating oil;
(vii) payment, on behalf of the owner, of expenses incurred in providing services
or in relation to the management of ship;
(viii) the entry of ship in a protection or indemnity association;
(ix) dealing with insurance, salvage and other claims; and
(x) arranging of insurance in relation to ship; (section 65(96a) of the Finance Act,
1994)
         “taxable service” means any service provided or to be provided to any
person, under a contract or an agreement, by any other person, in relation to
ship management service; (section 65(105)(zzzt) of the Finance Act, 1994)
Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006


Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cases, where
the provider of taxable service is located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
read with Taxation of Services (Provided from outside India and received in India)
Rules, 2006


Scope of Service:
Owners or operators of ships enter into an agreement with ship managers for
provision of a wide range of services in respect of running and operations of
ships. Indicative list of services provided under this category are mentioned under
the definition of “ship management service”.
(Ref: Joint Secretary (TRU)’s letter D.O.F.No. 334/4/2006-TRU dated
28.02.2006)

General Exemptions:
Sr.No.    Notification No.                      Nature of exemption
  1          16/2002             Services provided to United nations or any
                                 International Organisation
                                 Exemption to value of goods and material s       old
   2            12/2003          during the course of providing taxable service,
                                 subject to conditions laid down in the notification.
   3            4/2004           Service provided to a developer of Special
                                 Economic Zone or Unit located in SEZ
                                 Exemption from service tax for taxable services
4   6/2005   upto gross value of Rs. 4 lakhs, in case of service
             providers whose gross turnover for the preceding
             financial year was less than Rs. 4 lakhs ( w.e.f
             01.04.2005)
                           SPONSORSHIP SERVICE

Date of Introduction: 01.05.2006 vide Notification No.15/2006 dated
                        25.04.2006

Definitions:
       “sponsorship” includes naming an event after the sponsor, displaying the
sponsor’s company logo or trading name, giving the sponsor exclusive or priority
booking rights, sponsoring prizes or trophies for competition; but does not include
any financial or other support in the form of donations or gifts, given by the
donors subject to the condition that the service provider is under no obligation to
provide anything in return to such donors; (section 65(99a) of Finance Act, 1994)

        “ta xable service” means any service provided or to be provided to any
body corporate or firm, by any person receiving sponsorship, in relation to such
sponsorship, in any manner, but does not include services in relation to
sponsorship of sports events;
Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006
Who is responsible to pay Service Tax:
In case of sponsorship service provided to any body corporate or firm, the body
corporate or firm, as the case may be, who receives such sponsorship service is
responsible to pay service tax.
(Ref.: Notification No.36/2004 dated 31.12.2004 as amended by Notification
No.16/2006 dated 25.04.2006 and Rule 2(1)(d)(vii) of Ser   vice Tax Rules, 1994
Scope of Service:
Body corporates or firms involved in business or commerce sponsor events with
an intent to obtain commercial benefit or bringing their name or products or
                                                                  t
services in public image to public attention by associating wi h a popular or
successful event. This is an alternate form of advertisement. Consideration is
normally paid in return for naming of the event after the sponsor or displaying
the sponsoring company’s logo or trading name or giving the sponsor exclusiveor
priority booking rights. Service tax is leviable only when the sponsor is any body
corporate or firm. Sponsorship of sports events is excluded from the scope of
this levy.     Service tax is collected under reverse charge method from the
recipient of service namely the body corporate or firm who sponsors the event.
It may be noted that the organizers of events are not liable to pay service tax
under sponsorship service.
(Ref: Joint Secretary (TRU)’s letter D.O.F.No. 334/4/2006-TRU dated
28.02.2006)

General Exemptions:
Sr.No.    Notification No.                     Nature of exemption
  1          16/2002            Services provided to United nations or any
                                International Organisation
                                Exemption to value of goods and material sold
   2           12/2003          during the course of providing taxable service,
                                subject to conditions laid down in the notification.
   3            4/2004          Service provided to a developer of Special
                                Economic Zone or Unit located in SEZ
                                Exemption from service tax for taxable services
   4            6/2005          upto gross value of Rs. 4 lakhs, in case of service
                                providers whose gross turnover for the preceding
                                financial year was less than Rs. 4 lakhs ( w.e.f
                                01.04.2005)
                          TRANSPORT BY CRUISE SHIP


Date of Introduction: 01.05.2006 vide Notification No.15/2006 dated
                             25.04.2006
Definitions:
               “taxable service” means any service provided or to be provided to
any person, by any other person, in relation to transport of such person
embarking from any port or other port in India, by a cruise ship.
Explanation.—For the purposes of this sub-clause, “cruise ship” means a ship or
vessel used for providing recreational or pleasure trips, but does not include a
ship or vessel used for private purposes or a ship or vessel of, or less than, fifteen
net tonnage; (section 65(105)(zzzy) of the Finance Act, 1994)
Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006

Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cases, where
the provider of taxable service is located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
read with Taxation of Services (Provided from outside India and received in India)
Rules, 2006
Scope of Service:
Services provided to any person embarking from any port in India for transport
by cruise ships are proposed to be taxed under this category.
(Ref: Joint Secretary (TRU)’s letter D.O.F.No. 334/4/2006-TRU dated
28.02.2006)

General Exemptions:
Sr.No.    Notification No.                      Nature of exemption
  1          16/2002             Services provided to United nations or any
                                 International Organisation
                                 Exemption to value of goods and material sold
   2            12/2003          during the course of providing taxable service,
                                 subject to conditions laid down in the notification.
   3             4/2004          Service provided to a developer of Special
                                 Economic Zone or Unit located in SEZ
                                 Exemption from service tax for taxable services
   4             6/2005          upto gross value of Rs. 4 lakhs, in case of service
                                 providers whose gross turnover for the preceding
                                 financial year was less than Rs. 4 lakhs ( w.e.f
                                 01.04.2005)
TRANSPORT OF GOODS IN CONTAINERS BY RAIL (OTHER THAN INDIAN
                         RAILWAY)

Date of Introduction: 01.05.2006 vide Notification No.15/2006 dated
                        25.04.2006

Definitions:
       “taxable service” means any service provided or to be provided to any
person, by any other person other than Government railway as defined in clause
(20) of section 2 of the Railways Act, 1989, in relation to transport of goods in
containers by rail, in any manner; (section 65(105)(zzzp) of the Finance Act,
1994)
Value of Taxable Service:
The value of taxable service shall be the gross amount charged by the service
provider for providing such service and the money value of any other
consideration ( if any) received for providing such service. The value of taxable
service shall be determined as per the provisions made under section 67 of the
Finance Act, read with Service Tax (Determination of Value ) Rules, 2006

Who is responsible to pay Service Tax:
The service provider is responsible to pay service tax. However, in cases, where
the provider of taxable service is located outside India and the recipient of
service is located in India, the recipient of service is responsible for payment of
service tax. The responsibility to pay service tax under such situations is
determined by the provisions made under section 66A of the Finance Act, 1994,
read with Taxation of Services (Provided from outside India and received in India)
Rules, 2006
Scope of Service:
The proposed levy is on transport of goods in containers by rail. Service provided
by Indian Ra ilways is excluded. Suitable abatement for the amount paid by such
service providers to railways for haulage services will be prescribed separately.
The levy will, therefore, be restricted only to that portion of the consideration
received and retained by the service provider for the services provided.
(Ref: Joint Secretary (TRU)’s letter D.O.F.No. 334/4/2006-TRU dated
28.02.2006)

Service-specific Exemption:
An abatement of 70% from the value of taxable services has been provided vide
Notification No.1/2006 dated 01.03.2006 as amended by Notification No.20/2006
dated 25.04.2006

General Exemptions:
Sr.No.    Notification No.                     Nature of exemption
  1          16/2002            Services provided to United nations or any
                                International Organisation
                                Exemption to value of goods and material sold
   2           12/2003          during the course of providing taxable service,
                                subject to conditions laid down in the notification.
   3            4/2004          Service provided to a developer of Special
                                Economic Zone or Unit located in SEZ
                                Exemption from service tax for taxable services
   4            6/2005          upto gross value of Rs. 4 lakhs, in case of service
                                providers whose gross turnover for the preceding
                                financial year was less than Rs. 4 lakhs ( w.e.f
                                01.04.2005)

				
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