If the aggregate value of the taxable services provided by a service provider in a financial year is up to Rs 4 Lakh, there is no liability on the service provider to pay the service tax as it is exempted vide Notification No 6/2005-service Tax dated 1 March 2005. However, the benefit of exemption is available subject to the following conditions:
a) Service is not provided by the service provider under a brand name or trade name
b) Value of service shall be aggregate value not exceeding Rs 4 Lakh from one or more premises and from one or more taxable service
c) In the last preceding financial year, aggregate value of all taxable services provided from one or more premises does not exceed Rs 4 Lakh
d) It is obvious that service provider should not avail the credit of service tax paid on the input service under the CENVAT Credit Rules, 2004
e) In case aggregate value of taxable service exceeds Rs 4 lakh, the first consecutive payments upto Rs 4 Lakh will be exempted. Subsequent payments will be subject to tax. Further, in the subsequent year, the benefit of exemption will not be available as the aggregate value of the preceding year will exceed Rs 4 Lakh
f) The exemption is not available for the services in respect of which the service receiver is liable to pay the service tax on the services availed by him, as in the case of Goods Transport Agency Service. Irrespective of the aggregate value of taxable service provided by a corporate service provider, if any freight has been paid, service tax has to be paid by the company.
Wednesday, December 27, 2006
14. Exemption from service tax
If the aggregate value of the taxable services provided by a service provider in a financial year is up to Rs 4 Lakh, there is no liability on the service provider to pay the service tax as it is exempted vide Notification No 6/2005-service Tax dated 1 March 2005. However, the benefit of exemption is available subject to the following conditions:
a) Service is not provided by the service provider under a brand name or trade name
b) Value of service shall be aggregate value not exceeding Rs 4 Lakh from one or more premises and from one or more taxable service
c) In the last preceding financial year, aggregate value of all taxable services provided from one or more premises does not exceed Rs 4 Lakh
d) It is obvious that service provider should not avail the credit of service tax paid on the input service under the CENVAT Credit Rules, 2004
e) In case aggregate value of taxable service exceeds Rs 4 lakh, the first consecutive payments upto Rs 4 Lakh will be exempted. Subsequent payments will be subject to tax. Further, in the subsequent year, the benefit of exemption will not be available as the aggregate value of the preceding year will exceed Rs 4 Lakh
f) The exemption is not available for the services in respect of which the service receiver is liable to pay the service tax on the services availed by him, as in the case of Goods Transport Agency Service. Irrespective of the aggregate value of taxable service provided by a corporate service provider, if any freight has been paid, service tax has to be paid by the company.
a) Service is not provided by the service provider under a brand name or trade name
b) Value of service shall be aggregate value not exceeding Rs 4 Lakh from one or more premises and from one or more taxable service
c) In the last preceding financial year, aggregate value of all taxable services provided from one or more premises does not exceed Rs 4 Lakh
d) It is obvious that service provider should not avail the credit of service tax paid on the input service under the CENVAT Credit Rules, 2004
e) In case aggregate value of taxable service exceeds Rs 4 lakh, the first consecutive payments upto Rs 4 Lakh will be exempted. Subsequent payments will be subject to tax. Further, in the subsequent year, the benefit of exemption will not be available as the aggregate value of the preceding year will exceed Rs 4 Lakh
f) The exemption is not available for the services in respect of which the service receiver is liable to pay the service tax on the services availed by him, as in the case of Goods Transport Agency Service. Irrespective of the aggregate value of taxable service provided by a corporate service provider, if any freight has been paid, service tax has to be paid by the company.
14. Exemption from service tax
If the aggregate value of the taxable services provided by a service provider in a financial year is up to Rs 4 Lakh, there is no liability on the service provider to pay the service tax as it is exempted vide Notification No 6/2005-service Tax dated 1 March 2005. However, the benefit of exemption is available subject to the following conditions:
a) Service is not provided by the service provider under a brand name or trade name
b) Value of service shall be aggregate value not exceeding Rs 4 Lakh from one or more premises and from one or more taxable service
c) In the last preceding financial year, aggregate value of all taxable services provided from one or more premises does not exceed Rs 4 Lakh
d) It is obvious that service provider should not avail the credit of service tax paid on the input service under the CENVAT Credit Rules, 2004
e) In case aggregate value of taxable service exceeds Rs 4 lakh, the first consecutive payments upto Rs 4 Lakh will be exempted. Subsequent payments will be subject to tax. Further, in the subsequent year, the benefit of exemption will not be available as the aggregate value of the preceding year will exceed Rs 4 Lakh
f) The exemption is not available for the services in respect of which the service receiver is liable to pay the service tax on the services availed by him, as in the case of Goods Transport Agency Service. Irrespective of the aggregate value of taxable service provided by a corporate service provider, if any freight has been paid, service tax has to be paid by the company.
a) Service is not provided by the service provider under a brand name or trade name
b) Value of service shall be aggregate value not exceeding Rs 4 Lakh from one or more premises and from one or more taxable service
c) In the last preceding financial year, aggregate value of all taxable services provided from one or more premises does not exceed Rs 4 Lakh
d) It is obvious that service provider should not avail the credit of service tax paid on the input service under the CENVAT Credit Rules, 2004
e) In case aggregate value of taxable service exceeds Rs 4 lakh, the first consecutive payments upto Rs 4 Lakh will be exempted. Subsequent payments will be subject to tax. Further, in the subsequent year, the benefit of exemption will not be available as the aggregate value of the preceding year will exceed Rs 4 Lakh
f) The exemption is not available for the services in respect of which the service receiver is liable to pay the service tax on the services availed by him, as in the case of Goods Transport Agency Service. Irrespective of the aggregate value of taxable service provided by a corporate service provider, if any freight has been paid, service tax has to be paid by the company.
Monday, December 25, 2006
Airport Service
India is a developing country with a growth rate of about 7 to 9%. Service Industry is developing rapidly than manufacturing sector and growth rate in agricultural sector is the lowest.
To increase the tax base and tape new areas for revenue, Government of India has started imposing Service Tax on designated services since 1994. Initially, a few services were taxed, but over the years, the list of taxable service is expanding and at present 105 services are under tax net.
This blog seeks to demystify the service tax on Airport Service.
To increase the tax base and tape new areas for revenue, Government of India has started imposing Service Tax on designated services since 1994. Initially, a few services were taxed, but over the years, the list of taxable service is expanding and at present 105 services are under tax net.
This blog seeks to demystify the service tax on Airport Service.
Airport Service
India is a developing country with a growth rate of about 7 to 9%. Service Industry is developing rapidly than manufacturing sector and growth rate in agricultural sector is the lowest.
To increase the tax base and tape new areas for revenue, Government of India has started imposing Service Tax on designated services since 1994. Initially, a few services were taxed, but over the years, the list of taxable service is expanding and at present 105 services are under tax net.
This blog seeks to demystify the service tax on Airport Service.
To increase the tax base and tape new areas for revenue, Government of India has started imposing Service Tax on designated services since 1994. Initially, a few services were taxed, but over the years, the list of taxable service is expanding and at present 105 services are under tax net.
This blog seeks to demystify the service tax on Airport Service.
1. Meaning and scope
1.1
As per section 65 (105)(zzm) of the Finance Act, 1994 (‘the Finance Act’), any service provided or to be provided to any person, by airports authority or any person authorised by it, in an airport or a civil enclave is liable for service tax.
1.2
As per section 65(3d) of the Finance Act, ‘airports authority’ means the Airports Authority of India (‘AAI’) constituted under section 3 of the Airports Authority of India Act, 1994 (‘the AAI Act’) and also includes any person having the charge of management of an airport or a civil enclave.
1.3
As per section 65(3c) of the Finance Act read with section 2(b) of the AAI Act, "airport" means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome. As per section 2(2) of the Aircraft Act, 1934 (‘the Aircraft Act’), "aerodrome" means any definite or limited ground or water area intended to be used, either wholly or in part, for the landing or departure of aircraft, and includes all buildings, sheds, vessels, piers, and other structures thereon or appertaining thereto.
1.4
As per section 65 (24a) of the Finance Act read with section 2(i) of the AAI Act, "civil enclave" means the area, if any, allotted at an airport belonging to any armed force of the Union, for use by persons availing of any air transport services from such airport or for the handling of baggage or cargo by such service, and includes land comprising of any building and structure on such area;
As per section 65 (105)(zzm) of the Finance Act, 1994 (‘the Finance Act’), any service provided or to be provided to any person, by airports authority or any person authorised by it, in an airport or a civil enclave is liable for service tax.
1.2
As per section 65(3d) of the Finance Act, ‘airports authority’ means the Airports Authority of India (‘AAI’) constituted under section 3 of the Airports Authority of India Act, 1994 (‘the AAI Act’) and also includes any person having the charge of management of an airport or a civil enclave.
1.3
As per section 65(3c) of the Finance Act read with section 2(b) of the AAI Act, "airport" means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome. As per section 2(2) of the Aircraft Act, 1934 (‘the Aircraft Act’), "aerodrome" means any definite or limited ground or water area intended to be used, either wholly or in part, for the landing or departure of aircraft, and includes all buildings, sheds, vessels, piers, and other structures thereon or appertaining thereto.
1.4
As per section 65 (24a) of the Finance Act read with section 2(i) of the AAI Act, "civil enclave" means the area, if any, allotted at an airport belonging to any armed force of the Union, for use by persons availing of any air transport services from such airport or for the handling of baggage or cargo by such service, and includes land comprising of any building and structure on such area;
2. Key ingredients
• service should be provided by airports authority or any person authorised by it
• service should be provided in an airport or a civil enclave
• any service provided or to be provided is subject to service tax
• service may be provided to any person
• service should be provided in an airport or a civil enclave
• any service provided or to be provided is subject to service tax
• service may be provided to any person
1. Meaning and scope
1.1
As per section 65 (105)(zzm) of the Finance Act, 1994 (‘the Finance Act’), any service provided or to be provided to any person, by airports authority or any person authorised by it, in an airport or a civil enclave is liable for service tax.
1.2
As per section 65(3d) of the Finance Act, ‘airports authority’ means the Airports Authority of India (‘AAI’) constituted under section 3 of the Airports Authority of India Act, 1994 (‘the AAI Act’) and also includes any person having the charge of management of an airport or a civil enclave.
1.3
As per section 65(3c) of the Finance Act read with section 2(b) of the AAI Act, "airport" means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome. As per section 2(2) of the Aircraft Act, 1934 (‘the Aircraft Act’), "aerodrome" means any definite or limited ground or water area intended to be used, either wholly or in part, for the landing or departure of aircraft, and includes all buildings, sheds, vessels, piers, and other structures thereon or appertaining thereto.
1.4
As per section 65 (24a) of the Finance Act read with section 2(i) of the AAI Act, "civil enclave" means the area, if any, allotted at an airport belonging to any armed force of the Union, for use by persons availing of any air transport services from such airport or for the handling of baggage or cargo by such service, and includes land comprising of any building and structure on such area;
As per section 65 (105)(zzm) of the Finance Act, 1994 (‘the Finance Act’), any service provided or to be provided to any person, by airports authority or any person authorised by it, in an airport or a civil enclave is liable for service tax.
1.2
As per section 65(3d) of the Finance Act, ‘airports authority’ means the Airports Authority of India (‘AAI’) constituted under section 3 of the Airports Authority of India Act, 1994 (‘the AAI Act’) and also includes any person having the charge of management of an airport or a civil enclave.
1.3
As per section 65(3c) of the Finance Act read with section 2(b) of the AAI Act, "airport" means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome. As per section 2(2) of the Aircraft Act, 1934 (‘the Aircraft Act’), "aerodrome" means any definite or limited ground or water area intended to be used, either wholly or in part, for the landing or departure of aircraft, and includes all buildings, sheds, vessels, piers, and other structures thereon or appertaining thereto.
1.4
As per section 65 (24a) of the Finance Act read with section 2(i) of the AAI Act, "civil enclave" means the area, if any, allotted at an airport belonging to any armed force of the Union, for use by persons availing of any air transport services from such airport or for the handling of baggage or cargo by such service, and includes land comprising of any building and structure on such area;
2. Key ingredients
• service should be provided by airports authority or any person authorised by it
• service should be provided in an airport or a civil enclave
• any service provided or to be provided is subject to service tax
• service may be provided to any person
• service should be provided in an airport or a civil enclave
• any service provided or to be provided is subject to service tax
• service may be provided to any person
3 Service should be provided by airports authority or by any authorised person
3.1
AAI was formed on 1st April 1995 by merging the International Airports Authority of India and the National Airports Authority with a view to accelerate the integrated development, expansion and modernization of the operational, terminal and cargo facilities at the airports in the country conforming to international standards. Most of the International Airport and Domestic Airports as well as Civil Enclaves are managed by AAI. However, Hindustan Aeronautics Ltd. (‘HAL’), Delhi International Airports Pvt. Ltd. (‘DIAL’), Mumbai International Airports Pvt. Ltd. (‘MIAL’) and Cochin International Airport Ltd. (‘CIAL’) manage Bangalore, Delhi, Mumbai and Cochin airports respectively. Therefore, AAI, HAL, DIAL, MIAL and CIAL are airport authorities (‘the AA’) for the purpose of service tax.
3.2
As per section 12 of the AAI Act, AAI is required to manage the airports and the civil enclaves. It is also required to provide air traffic service and air transport service at any airport and civil enclaves. It is also mandated to establish warehouses and cargo complexes at the airports for the storage or processing of goods, arrange for postal, money exchange, insurance and telephone facilities for the use of passengers and other persons at the airports and civil enclaves.
3.3
Airport service can be provided directly by the AA or by a person authorised by the AA. Authorised person can be an individual or a group of individual whether incorporated or not. An authorised person can provide only those services for which he has been granted permission. An airport service provided by an un-authorised person can not be taxed under the category of airport service. Similarly, a service provided by an authorised person, for which he has not been authorised by the AA also can not be taxed under the category of airport service.
AAI was formed on 1st April 1995 by merging the International Airports Authority of India and the National Airports Authority with a view to accelerate the integrated development, expansion and modernization of the operational, terminal and cargo facilities at the airports in the country conforming to international standards. Most of the International Airport and Domestic Airports as well as Civil Enclaves are managed by AAI. However, Hindustan Aeronautics Ltd. (‘HAL’), Delhi International Airports Pvt. Ltd. (‘DIAL’), Mumbai International Airports Pvt. Ltd. (‘MIAL’) and Cochin International Airport Ltd. (‘CIAL’) manage Bangalore, Delhi, Mumbai and Cochin airports respectively. Therefore, AAI, HAL, DIAL, MIAL and CIAL are airport authorities (‘the AA’) for the purpose of service tax.
3.2
As per section 12 of the AAI Act, AAI is required to manage the airports and the civil enclaves. It is also required to provide air traffic service and air transport service at any airport and civil enclaves. It is also mandated to establish warehouses and cargo complexes at the airports for the storage or processing of goods, arrange for postal, money exchange, insurance and telephone facilities for the use of passengers and other persons at the airports and civil enclaves.
3.3
Airport service can be provided directly by the AA or by a person authorised by the AA. Authorised person can be an individual or a group of individual whether incorporated or not. An authorised person can provide only those services for which he has been granted permission. An airport service provided by an un-authorised person can not be taxed under the category of airport service. Similarly, a service provided by an authorised person, for which he has not been authorised by the AA also can not be taxed under the category of airport service.
3 Service should be provided by airports authority or by any authorised person
3.1
AAI was formed on 1st April 1995 by merging the International Airports Authority of India and the National Airports Authority with a view to accelerate the integrated development, expansion and modernization of the operational, terminal and cargo facilities at the airports in the country conforming to international standards. Most of the International Airport and Domestic Airports as well as Civil Enclaves are managed by AAI. However, Hindustan Aeronautics Ltd. (‘HAL’), Delhi International Airports Pvt. Ltd. (‘DIAL’), Mumbai International Airports Pvt. Ltd. (‘MIAL’) and Cochin International Airport Ltd. (‘CIAL’) manage Bangalore, Delhi, Mumbai and Cochin airports respectively. Therefore, AAI, HAL, DIAL, MIAL and CIAL are airport authorities (‘the AA’) for the purpose of service tax.
3.2
As per section 12 of the AAI Act, AAI is required to manage the airports and the civil enclaves. It is also required to provide air traffic service and air transport service at any airport and civil enclaves. It is also mandated to establish warehouses and cargo complexes at the airports for the storage or processing of goods, arrange for postal, money exchange, insurance and telephone facilities for the use of passengers and other persons at the airports and civil enclaves.
3.3
Airport service can be provided directly by the AA or by a person authorised by the AA. Authorised person can be an individual or a group of individual whether incorporated or not. An authorised person can provide only those services for which he has been granted permission. An airport service provided by an un-authorised person can not be taxed under the category of airport service. Similarly, a service provided by an authorised person, for which he has not been authorised by the AA also can not be taxed under the category of airport service.
AAI was formed on 1st April 1995 by merging the International Airports Authority of India and the National Airports Authority with a view to accelerate the integrated development, expansion and modernization of the operational, terminal and cargo facilities at the airports in the country conforming to international standards. Most of the International Airport and Domestic Airports as well as Civil Enclaves are managed by AAI. However, Hindustan Aeronautics Ltd. (‘HAL’), Delhi International Airports Pvt. Ltd. (‘DIAL’), Mumbai International Airports Pvt. Ltd. (‘MIAL’) and Cochin International Airport Ltd. (‘CIAL’) manage Bangalore, Delhi, Mumbai and Cochin airports respectively. Therefore, AAI, HAL, DIAL, MIAL and CIAL are airport authorities (‘the AA’) for the purpose of service tax.
3.2
As per section 12 of the AAI Act, AAI is required to manage the airports and the civil enclaves. It is also required to provide air traffic service and air transport service at any airport and civil enclaves. It is also mandated to establish warehouses and cargo complexes at the airports for the storage or processing of goods, arrange for postal, money exchange, insurance and telephone facilities for the use of passengers and other persons at the airports and civil enclaves.
3.3
Airport service can be provided directly by the AA or by a person authorised by the AA. Authorised person can be an individual or a group of individual whether incorporated or not. An authorised person can provide only those services for which he has been granted permission. An airport service provided by an un-authorised person can not be taxed under the category of airport service. Similarly, a service provided by an authorised person, for which he has not been authorised by the AA also can not be taxed under the category of airport service.
4 Services should be provided in an airport or a civil enclave
4.1
Airport and civil enclave has been defined in the Finance Act. These are well defined enclosed area which include airstrip, parking bay, hangers for aircraft, maintenance area, passenger handling area, cargo handling area, air traffic control facilities, amenities, all buildings, shed and other open area inside the airport/civil enclave.
4.2
A service provided by the AA or an authorised person outside the airport or civil enclave is beyond the scope of airport service.
4.3
Further, airport and heliport are defined separately in the AAI Act. Section 2 (j) of the AAI Act defines "heliport" as an area, either at ground level or elevated on a structure, used or intended to be used for the landing and take-of of helicopters and includes any area for parking helicopters and all buildings and structures thereon or appertaining thereto. On the other hand, as aforesaid, airport has been defined under section 2(b) of the AAI Act, which usually has runways. Therefore, services provided at heliports do not fall within the scope of airport service.
Airport and civil enclave has been defined in the Finance Act. These are well defined enclosed area which include airstrip, parking bay, hangers for aircraft, maintenance area, passenger handling area, cargo handling area, air traffic control facilities, amenities, all buildings, shed and other open area inside the airport/civil enclave.
4.2
A service provided by the AA or an authorised person outside the airport or civil enclave is beyond the scope of airport service.
4.3
Further, airport and heliport are defined separately in the AAI Act. Section 2 (j) of the AAI Act defines "heliport" as an area, either at ground level or elevated on a structure, used or intended to be used for the landing and take-of of helicopters and includes any area for parking helicopters and all buildings and structures thereon or appertaining thereto. On the other hand, as aforesaid, airport has been defined under section 2(b) of the AAI Act, which usually has runways. Therefore, services provided at heliports do not fall within the scope of airport service.
4 Services should be provided in an airport or a civil enclave
4.1
Airport and civil enclave has been defined in the Finance Act. These are well defined enclosed area which include airstrip, parking bay, hangers for aircraft, maintenance area, passenger handling area, cargo handling area, air traffic control facilities, amenities, all buildings, shed and other open area inside the airport/civil enclave.
4.2
A service provided by the AA or an authorised person outside the airport or civil enclave is beyond the scope of airport service.
4.3
Further, airport and heliport are defined separately in the AAI Act. Section 2 (j) of the AAI Act defines "heliport" as an area, either at ground level or elevated on a structure, used or intended to be used for the landing and take-of of helicopters and includes any area for parking helicopters and all buildings and structures thereon or appertaining thereto. On the other hand, as aforesaid, airport has been defined under section 2(b) of the AAI Act, which usually has runways. Therefore, services provided at heliports do not fall within the scope of airport service.
Airport and civil enclave has been defined in the Finance Act. These are well defined enclosed area which include airstrip, parking bay, hangers for aircraft, maintenance area, passenger handling area, cargo handling area, air traffic control facilities, amenities, all buildings, shed and other open area inside the airport/civil enclave.
4.2
A service provided by the AA or an authorised person outside the airport or civil enclave is beyond the scope of airport service.
4.3
Further, airport and heliport are defined separately in the AAI Act. Section 2 (j) of the AAI Act defines "heliport" as an area, either at ground level or elevated on a structure, used or intended to be used for the landing and take-of of helicopters and includes any area for parking helicopters and all buildings and structures thereon or appertaining thereto. On the other hand, as aforesaid, airport has been defined under section 2(b) of the AAI Act, which usually has runways. Therefore, services provided at heliports do not fall within the scope of airport service.
5 Any service provided or to be provided is subject to service tax
5.1
The Finance Act seeks to tax all services provided inside the airport and civil enclave. No specific description of the service has been given in the Finance Act. As per section 22 of the AAI Act, AAI may (i) charge fees or rent (a) for the landing, housing or parking of aircraft or for any other service or facility offered in connection with aircraft operations (b) for providing air traffic services, ground safety services, aeronautical communications and navigational aids and meteorological services (c) for the amenities given to the passengers and visitors, and (ii) charge fees or rent from persons who are given by AAI any facility for carrying on any trade or business.
5.2
In view of the above, following services are usually provided inside the airport:
• facility for landing, housing or parking of aircraft
• air traffic services
• Ground safety services
• Aeronautical communications and navigational aids and meteorological services
• Repair and maintenance of aircraft
• Passenger scanning and frisking
• Baggage scanning
• Transportation of passengers and baggage from aircraft to terminals
• Import and export cargo handling, storage and delivery
• Warehousing
• Postal, telephone and telex service
• Ticketing, hotel booking, airport transfer
• Money exchange, insurance
• Catering of passenger in the airport lounge
• Duty free shopping, snack bar, book stall
• Entry in to airport and Viewers gallery
• Parking of vehicles, etc
5.3
As per explanation given in section 22(1)(a) of the AAI Act, "aircraft" does not include an aircraft belonging to any armed force of the Union and "aircraft operations" does not include operations of any aircraft belonging to the said force. Therefore, services given to an armed force aircraft does not fall within the ambit of taxable airport service.
5.4
Renting or leasing out of a part of an airport/ civil enclave or premises thereof is not deemed as rendering of service and therefore, will not be taxed . However, services rendered from therein will remain liable for service tax as the rented/leased property is still remains a part of airport/civil enclave and service will be rendered inside the airport/civil enclave. Telephone service, telex service, escort service, hotel booking service etc. provided by tenant/lease holder will fall within the mischief of airport service.
5.6
Sale of goods is not a service. Therefore, sale of goods/books/foods/snacks etc. by duty free shops, book stores, restaurants, kiosks, etc. are not subject to service tax. However, supply of food and beverage to the passengers by the restaurants/snack bar/kiosk inside airport against coupons issued by the Airlines may be considered as catering service subject to tax, for the reasons that (i) passengers get only those food and beverage which is decided by the Airlines and not as per their choice/menu card, (ii) payment is made by the Airlines to the restaurants/snack bar/kiosk and not by passengers themselves. On the other hand, if Airline purchases food and beverage from the restaurants/snack bar/kiosk situated inside airport and supply the same to passengers against coupons, it may not fall within the ambit of service tax, reason being that (i) for restaurants/snack bar/kiosk, it is a sell of goods to the Airline, and (ii) for Airline, it is a free service to the passengers. In this scenario, when supply of food and beverage to passengers is considered as service, it will be taxable under the category ‘airport service’ and not under ‘outdoor catering service’.
5.7
Supply of food packets to the Airlines by Air Caterers for in-flight catering of passengers falls within the ambit of port service and exigible to tax.
5.8
Cleaning, inspection, repair and maintenance of the aircraft are rendered inside airport; therefore these services are exigible to service tax under ‘airport service’.
5.9
AAI provides storage of the cargo in warehouses and charge rent for such storage. As these storage services are provided inside the airport, storage rent received by AAI or authorised persons is exigible to service tax under ‘airport service’.
5.10
It may be noted that any service includes each and every service rendered inside the airport or civil enclave, whether such service is otherwise taxable or not. It will also include all those service, which otherwise are exempted. Transportation charges paid on transportation of good for export are exempted from the levy of service tax. However, transportation charges paid on transportation of good for export inside the airport will be taxable under airport service without any exemption.
The Finance Act seeks to tax all services provided inside the airport and civil enclave. No specific description of the service has been given in the Finance Act. As per section 22 of the AAI Act, AAI may (i) charge fees or rent (a) for the landing, housing or parking of aircraft or for any other service or facility offered in connection with aircraft operations (b) for providing air traffic services, ground safety services, aeronautical communications and navigational aids and meteorological services (c) for the amenities given to the passengers and visitors, and (ii) charge fees or rent from persons who are given by AAI any facility for carrying on any trade or business.
5.2
In view of the above, following services are usually provided inside the airport:
• facility for landing, housing or parking of aircraft
• air traffic services
• Ground safety services
• Aeronautical communications and navigational aids and meteorological services
• Repair and maintenance of aircraft
• Passenger scanning and frisking
• Baggage scanning
• Transportation of passengers and baggage from aircraft to terminals
• Import and export cargo handling, storage and delivery
• Warehousing
• Postal, telephone and telex service
• Ticketing, hotel booking, airport transfer
• Money exchange, insurance
• Catering of passenger in the airport lounge
• Duty free shopping, snack bar, book stall
• Entry in to airport and Viewers gallery
• Parking of vehicles, etc
5.3
As per explanation given in section 22(1)(a) of the AAI Act, "aircraft" does not include an aircraft belonging to any armed force of the Union and "aircraft operations" does not include operations of any aircraft belonging to the said force. Therefore, services given to an armed force aircraft does not fall within the ambit of taxable airport service.
5.4
Renting or leasing out of a part of an airport/ civil enclave or premises thereof is not deemed as rendering of service and therefore, will not be taxed . However, services rendered from therein will remain liable for service tax as the rented/leased property is still remains a part of airport/civil enclave and service will be rendered inside the airport/civil enclave. Telephone service, telex service, escort service, hotel booking service etc. provided by tenant/lease holder will fall within the mischief of airport service.
5.6
Sale of goods is not a service. Therefore, sale of goods/books/foods/snacks etc. by duty free shops, book stores, restaurants, kiosks, etc. are not subject to service tax. However, supply of food and beverage to the passengers by the restaurants/snack bar/kiosk inside airport against coupons issued by the Airlines may be considered as catering service subject to tax, for the reasons that (i) passengers get only those food and beverage which is decided by the Airlines and not as per their choice/menu card, (ii) payment is made by the Airlines to the restaurants/snack bar/kiosk and not by passengers themselves. On the other hand, if Airline purchases food and beverage from the restaurants/snack bar/kiosk situated inside airport and supply the same to passengers against coupons, it may not fall within the ambit of service tax, reason being that (i) for restaurants/snack bar/kiosk, it is a sell of goods to the Airline, and (ii) for Airline, it is a free service to the passengers. In this scenario, when supply of food and beverage to passengers is considered as service, it will be taxable under the category ‘airport service’ and not under ‘outdoor catering service’.
5.7
Supply of food packets to the Airlines by Air Caterers for in-flight catering of passengers falls within the ambit of port service and exigible to tax.
5.8
Cleaning, inspection, repair and maintenance of the aircraft are rendered inside airport; therefore these services are exigible to service tax under ‘airport service’.
5.9
AAI provides storage of the cargo in warehouses and charge rent for such storage. As these storage services are provided inside the airport, storage rent received by AAI or authorised persons is exigible to service tax under ‘airport service’.
5.10
It may be noted that any service includes each and every service rendered inside the airport or civil enclave, whether such service is otherwise taxable or not. It will also include all those service, which otherwise are exempted. Transportation charges paid on transportation of good for export are exempted from the levy of service tax. However, transportation charges paid on transportation of good for export inside the airport will be taxable under airport service without any exemption.
6 Service may be provided to any person
6.1
The Finance Act seeks to levy service tax on services provided by AA and persons authorised by AA to any person. Any person can be an individual or a firm or a company. Whether, any person will include AA incase it receives services from authorised person. To illustrate, AAI hires an agency for running of X-ray machine meant for scanning of passengers baggage. The agency charges a lump sum amount or amount calculated on the basis of scanned baggage. The question is whether agency is liable to pay service tax as service has been rendered inside airport. It appears that intend of the legislation is to levy service tax on services provided by AAI directly or indirectly through a authorised person, the agency being discharging the function of AAI, it cannot be subjected to tax under airport service. However, if such service, i.e. running of X-ray machine for a client, is otherwise taxable under a different heading, then agency has to pay service tax under that appropriate heading.
6.2
The Board has clarified that charges such as royalty, license fees etc. collected by AAI from other service providers at the airport such as ground handling, security, common user terminal services etc. are chargeable to service tax under ‘airport service’ . The above clarification appears to be at variance with the intention of the legislation. AAI receives security services for safety and security of the airport which is a legislative mandate to the AAI under the AAI Act. In this case AAI or authorised persons are not providing any airport service, therefore they do not appear to be exigible to service tax under ‘airport service’. However, they are exigible to service tax under ‘Security service’. On the other hand, if an authorised security agency is providing a security service to an airline, it will be exigible to service tax under ‘airport service’.
6.3
Generally airport service may be provided to the following persons:
• Airlines
• Passengers in terms of utilities like telephone, booking etc
• Importers and exporters of goods
• Aircraft owners
The Finance Act seeks to levy service tax on services provided by AA and persons authorised by AA to any person. Any person can be an individual or a firm or a company. Whether, any person will include AA incase it receives services from authorised person. To illustrate, AAI hires an agency for running of X-ray machine meant for scanning of passengers baggage. The agency charges a lump sum amount or amount calculated on the basis of scanned baggage. The question is whether agency is liable to pay service tax as service has been rendered inside airport. It appears that intend of the legislation is to levy service tax on services provided by AAI directly or indirectly through a authorised person, the agency being discharging the function of AAI, it cannot be subjected to tax under airport service. However, if such service, i.e. running of X-ray machine for a client, is otherwise taxable under a different heading, then agency has to pay service tax under that appropriate heading.
6.2
The Board has clarified that charges such as royalty, license fees etc. collected by AAI from other service providers at the airport such as ground handling, security, common user terminal services etc. are chargeable to service tax under ‘airport service’ . The above clarification appears to be at variance with the intention of the legislation. AAI receives security services for safety and security of the airport which is a legislative mandate to the AAI under the AAI Act. In this case AAI or authorised persons are not providing any airport service, therefore they do not appear to be exigible to service tax under ‘airport service’. However, they are exigible to service tax under ‘Security service’. On the other hand, if an authorised security agency is providing a security service to an airline, it will be exigible to service tax under ‘airport service’.
6.3
Generally airport service may be provided to the following persons:
• Airlines
• Passengers in terms of utilities like telephone, booking etc
• Importers and exporters of goods
• Aircraft owners
5 Any service provided or to be provided is subject to service tax
5.1
The Finance Act seeks to tax all services provided inside the airport and civil enclave. No specific description of the service has been given in the Finance Act. As per section 22 of the AAI Act, AAI may (i) charge fees or rent (a) for the landing, housing or parking of aircraft or for any other service or facility offered in connection with aircraft operations (b) for providing air traffic services, ground safety services, aeronautical communications and navigational aids and meteorological services (c) for the amenities given to the passengers and visitors, and (ii) charge fees or rent from persons who are given by AAI any facility for carrying on any trade or business.
5.2
In view of the above, following services are usually provided inside the airport:
• facility for landing, housing or parking of aircraft
• air traffic services
• Ground safety services
• Aeronautical communications and navigational aids and meteorological services
• Repair and maintenance of aircraft
• Passenger scanning and frisking
• Baggage scanning
• Transportation of passengers and baggage from aircraft to terminals
• Import and export cargo handling, storage and delivery
• Warehousing
• Postal, telephone and telex service
• Ticketing, hotel booking, airport transfer
• Money exchange, insurance
• Catering of passenger in the airport lounge
• Duty free shopping, snack bar, book stall
• Entry in to airport and Viewers gallery
• Parking of vehicles, etc
5.3
As per explanation given in section 22(1)(a) of the AAI Act, "aircraft" does not include an aircraft belonging to any armed force of the Union and "aircraft operations" does not include operations of any aircraft belonging to the said force. Therefore, services given to an armed force aircraft does not fall within the ambit of taxable airport service.
5.4
Renting or leasing out of a part of an airport/ civil enclave or premises thereof is not deemed as rendering of service and therefore, will not be taxed . However, services rendered from therein will remain liable for service tax as the rented/leased property is still remains a part of airport/civil enclave and service will be rendered inside the airport/civil enclave. Telephone service, telex service, escort service, hotel booking service etc. provided by tenant/lease holder will fall within the mischief of airport service.
5.6
Sale of goods is not a service. Therefore, sale of goods/books/foods/snacks etc. by duty free shops, book stores, restaurants, kiosks, etc. are not subject to service tax. However, supply of food and beverage to the passengers by the restaurants/snack bar/kiosk inside airport against coupons issued by the Airlines may be considered as catering service subject to tax, for the reasons that (i) passengers get only those food and beverage which is decided by the Airlines and not as per their choice/menu card, (ii) payment is made by the Airlines to the restaurants/snack bar/kiosk and not by passengers themselves. On the other hand, if Airline purchases food and beverage from the restaurants/snack bar/kiosk situated inside airport and supply the same to passengers against coupons, it may not fall within the ambit of service tax, reason being that (i) for restaurants/snack bar/kiosk, it is a sell of goods to the Airline, and (ii) for Airline, it is a free service to the passengers. In this scenario, when supply of food and beverage to passengers is considered as service, it will be taxable under the category ‘airport service’ and not under ‘outdoor catering service’.
5.7
Supply of food packets to the Airlines by Air Caterers for in-flight catering of passengers falls within the ambit of port service and exigible to tax.
5.8
Cleaning, inspection, repair and maintenance of the aircraft are rendered inside airport; therefore these services are exigible to service tax under ‘airport service’.
5.9
AAI provides storage of the cargo in warehouses and charge rent for such storage. As these storage services are provided inside the airport, storage rent received by AAI or authorised persons is exigible to service tax under ‘airport service’.
5.10
It may be noted that any service includes each and every service rendered inside the airport or civil enclave, whether such service is otherwise taxable or not. It will also include all those service, which otherwise are exempted. Transportation charges paid on transportation of good for export are exempted from the levy of service tax. However, transportation charges paid on transportation of good for export inside the airport will be taxable under airport service without any exemption.
The Finance Act seeks to tax all services provided inside the airport and civil enclave. No specific description of the service has been given in the Finance Act. As per section 22 of the AAI Act, AAI may (i) charge fees or rent (a) for the landing, housing or parking of aircraft or for any other service or facility offered in connection with aircraft operations (b) for providing air traffic services, ground safety services, aeronautical communications and navigational aids and meteorological services (c) for the amenities given to the passengers and visitors, and (ii) charge fees or rent from persons who are given by AAI any facility for carrying on any trade or business.
5.2
In view of the above, following services are usually provided inside the airport:
• facility for landing, housing or parking of aircraft
• air traffic services
• Ground safety services
• Aeronautical communications and navigational aids and meteorological services
• Repair and maintenance of aircraft
• Passenger scanning and frisking
• Baggage scanning
• Transportation of passengers and baggage from aircraft to terminals
• Import and export cargo handling, storage and delivery
• Warehousing
• Postal, telephone and telex service
• Ticketing, hotel booking, airport transfer
• Money exchange, insurance
• Catering of passenger in the airport lounge
• Duty free shopping, snack bar, book stall
• Entry in to airport and Viewers gallery
• Parking of vehicles, etc
5.3
As per explanation given in section 22(1)(a) of the AAI Act, "aircraft" does not include an aircraft belonging to any armed force of the Union and "aircraft operations" does not include operations of any aircraft belonging to the said force. Therefore, services given to an armed force aircraft does not fall within the ambit of taxable airport service.
5.4
Renting or leasing out of a part of an airport/ civil enclave or premises thereof is not deemed as rendering of service and therefore, will not be taxed . However, services rendered from therein will remain liable for service tax as the rented/leased property is still remains a part of airport/civil enclave and service will be rendered inside the airport/civil enclave. Telephone service, telex service, escort service, hotel booking service etc. provided by tenant/lease holder will fall within the mischief of airport service.
5.6
Sale of goods is not a service. Therefore, sale of goods/books/foods/snacks etc. by duty free shops, book stores, restaurants, kiosks, etc. are not subject to service tax. However, supply of food and beverage to the passengers by the restaurants/snack bar/kiosk inside airport against coupons issued by the Airlines may be considered as catering service subject to tax, for the reasons that (i) passengers get only those food and beverage which is decided by the Airlines and not as per their choice/menu card, (ii) payment is made by the Airlines to the restaurants/snack bar/kiosk and not by passengers themselves. On the other hand, if Airline purchases food and beverage from the restaurants/snack bar/kiosk situated inside airport and supply the same to passengers against coupons, it may not fall within the ambit of service tax, reason being that (i) for restaurants/snack bar/kiosk, it is a sell of goods to the Airline, and (ii) for Airline, it is a free service to the passengers. In this scenario, when supply of food and beverage to passengers is considered as service, it will be taxable under the category ‘airport service’ and not under ‘outdoor catering service’.
5.7
Supply of food packets to the Airlines by Air Caterers for in-flight catering of passengers falls within the ambit of port service and exigible to tax.
5.8
Cleaning, inspection, repair and maintenance of the aircraft are rendered inside airport; therefore these services are exigible to service tax under ‘airport service’.
5.9
AAI provides storage of the cargo in warehouses and charge rent for such storage. As these storage services are provided inside the airport, storage rent received by AAI or authorised persons is exigible to service tax under ‘airport service’.
5.10
It may be noted that any service includes each and every service rendered inside the airport or civil enclave, whether such service is otherwise taxable or not. It will also include all those service, which otherwise are exempted. Transportation charges paid on transportation of good for export are exempted from the levy of service tax. However, transportation charges paid on transportation of good for export inside the airport will be taxable under airport service without any exemption.
6 Service may be provided to any person
6.1
The Finance Act seeks to levy service tax on services provided by AA and persons authorised by AA to any person. Any person can be an individual or a firm or a company. Whether, any person will include AA incase it receives services from authorised person. To illustrate, AAI hires an agency for running of X-ray machine meant for scanning of passengers baggage. The agency charges a lump sum amount or amount calculated on the basis of scanned baggage. The question is whether agency is liable to pay service tax as service has been rendered inside airport. It appears that intend of the legislation is to levy service tax on services provided by AAI directly or indirectly through a authorised person, the agency being discharging the function of AAI, it cannot be subjected to tax under airport service. However, if such service, i.e. running of X-ray machine for a client, is otherwise taxable under a different heading, then agency has to pay service tax under that appropriate heading.
6.2
The Board has clarified that charges such as royalty, license fees etc. collected by AAI from other service providers at the airport such as ground handling, security, common user terminal services etc. are chargeable to service tax under ‘airport service’ . The above clarification appears to be at variance with the intention of the legislation. AAI receives security services for safety and security of the airport which is a legislative mandate to the AAI under the AAI Act. In this case AAI or authorised persons are not providing any airport service, therefore they do not appear to be exigible to service tax under ‘airport service’. However, they are exigible to service tax under ‘Security service’. On the other hand, if an authorised security agency is providing a security service to an airline, it will be exigible to service tax under ‘airport service’.
6.3
Generally airport service may be provided to the following persons:
• Airlines
• Passengers in terms of utilities like telephone, booking etc
• Importers and exporters of goods
• Aircraft owners
The Finance Act seeks to levy service tax on services provided by AA and persons authorised by AA to any person. Any person can be an individual or a firm or a company. Whether, any person will include AA incase it receives services from authorised person. To illustrate, AAI hires an agency for running of X-ray machine meant for scanning of passengers baggage. The agency charges a lump sum amount or amount calculated on the basis of scanned baggage. The question is whether agency is liable to pay service tax as service has been rendered inside airport. It appears that intend of the legislation is to levy service tax on services provided by AAI directly or indirectly through a authorised person, the agency being discharging the function of AAI, it cannot be subjected to tax under airport service. However, if such service, i.e. running of X-ray machine for a client, is otherwise taxable under a different heading, then agency has to pay service tax under that appropriate heading.
6.2
The Board has clarified that charges such as royalty, license fees etc. collected by AAI from other service providers at the airport such as ground handling, security, common user terminal services etc. are chargeable to service tax under ‘airport service’ . The above clarification appears to be at variance with the intention of the legislation. AAI receives security services for safety and security of the airport which is a legislative mandate to the AAI under the AAI Act. In this case AAI or authorised persons are not providing any airport service, therefore they do not appear to be exigible to service tax under ‘airport service’. However, they are exigible to service tax under ‘Security service’. On the other hand, if an authorised security agency is providing a security service to an airline, it will be exigible to service tax under ‘airport service’.
6.3
Generally airport service may be provided to the following persons:
• Airlines
• Passengers in terms of utilities like telephone, booking etc
• Importers and exporters of goods
• Aircraft owners
7 Who is liable to pay service tax?
7.1 In most of the cases, service provider, i.e., person who is providing taxable service is liable to pay service tax and, hence, AAI or authorised persons providing services is liable for service tax. However, in few cases, exceptions have been made and the service receiver is made to liable to pay service tax. By Finance Act, 1999 it has been provided that if a person providing service is non-resident and does not have address or place of business in India, service tax is payable by person receiving taxable service in India [Rule 2(1)(d)(iv)]. The amendment has come in effect from 11 May 1999. In such a case, person receiving the service will also have to register.
7.2 Repair and maintenance of an aircraft inside the hanger of an airport may be undertaken by Airbus or Boeing Company and they may not have any permanent address or place of business in India. In such case, service recipient is liable to pay service tax.
7.3 If a person pays service tax, which he was not liable to pay in the first place, he is entitled for a refund provided refund claim has been filed within the prescribed time .
7.2 Repair and maintenance of an aircraft inside the hanger of an airport may be undertaken by Airbus or Boeing Company and they may not have any permanent address or place of business in India. In such case, service recipient is liable to pay service tax.
7.3 If a person pays service tax, which he was not liable to pay in the first place, he is entitled for a refund provided refund claim has been filed within the prescribed time .
7 Who is liable to pay service tax?
7.1 In most of the cases, service provider, i.e., person who is providing taxable service is liable to pay service tax and, hence, AAI or authorised persons providing services is liable for service tax. However, in few cases, exceptions have been made and the service receiver is made to liable to pay service tax. By Finance Act, 1999 it has been provided that if a person providing service is non-resident and does not have address or place of business in India, service tax is payable by person receiving taxable service in India [Rule 2(1)(d)(iv)]. The amendment has come in effect from 11 May 1999. In such a case, person receiving the service will also have to register.
7.2 Repair and maintenance of an aircraft inside the hanger of an airport may be undertaken by Airbus or Boeing Company and they may not have any permanent address or place of business in India. In such case, service recipient is liable to pay service tax.
7.3 If a person pays service tax, which he was not liable to pay in the first place, he is entitled for a refund provided refund claim has been filed within the prescribed time .
7.2 Repair and maintenance of an aircraft inside the hanger of an airport may be undertaken by Airbus or Boeing Company and they may not have any permanent address or place of business in India. In such case, service recipient is liable to pay service tax.
7.3 If a person pays service tax, which he was not liable to pay in the first place, he is entitled for a refund provided refund claim has been filed within the prescribed time .
8. Valuation
8.1 The value of any taxable service is determined as per the provisions of the Service Tax (Determination of Value) Rules, 2006 [‘the Valuation Rules’].
8.2 As per Rule 3 of the Valuation Rules, the value of taxable service, where the consideration received is not wholly or partly consisting of money, is determined by the service provider in the following manner :-
(a) the value of such taxable service is equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration;
(b) where the value cannot be determined in accordance with clause (a), the service provider is required to determine the equivalent money value of such consideration which shall, in no case be less than the cost of provision of such taxable service.
8.3 Further, as per Rule 5(1) of the Valuation Rules, where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs are includable in the value for the purpose of charging service tax on the said service.
8.4 However, as per Rule 5(2) of the Valuation Rules, the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, are excluded from the value of the taxable service if all the following conditions are satisfied,
(i) the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured;
(ii) the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service;
(iii) the recipient of service is liable to make payment to the third party;
(iv) the recipient of service authorises the service provider to make payment on his behalf;
(v) the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party;
(vi) the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service;
(vii) the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and
(viii) the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account.
8.2 As per Rule 3 of the Valuation Rules, the value of taxable service, where the consideration received is not wholly or partly consisting of money, is determined by the service provider in the following manner :-
(a) the value of such taxable service is equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration;
(b) where the value cannot be determined in accordance with clause (a), the service provider is required to determine the equivalent money value of such consideration which shall, in no case be less than the cost of provision of such taxable service.
8.3 Further, as per Rule 5(1) of the Valuation Rules, where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs are includable in the value for the purpose of charging service tax on the said service.
8.4 However, as per Rule 5(2) of the Valuation Rules, the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, are excluded from the value of the taxable service if all the following conditions are satisfied,
(i) the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured;
(ii) the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service;
(iii) the recipient of service is liable to make payment to the third party;
(iv) the recipient of service authorises the service provider to make payment on his behalf;
(v) the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party;
(vi) the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service;
(vii) the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and
(viii) the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account.
8. Valuation
8.1 The value of any taxable service is determined as per the provisions of the Service Tax (Determination of Value) Rules, 2006 [‘the Valuation Rules’].
8.2 As per Rule 3 of the Valuation Rules, the value of taxable service, where the consideration received is not wholly or partly consisting of money, is determined by the service provider in the following manner :-
(a) the value of such taxable service is equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration;
(b) where the value cannot be determined in accordance with clause (a), the service provider is required to determine the equivalent money value of such consideration which shall, in no case be less than the cost of provision of such taxable service.
8.3 Further, as per Rule 5(1) of the Valuation Rules, where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs are includable in the value for the purpose of charging service tax on the said service.
8.4 However, as per Rule 5(2) of the Valuation Rules, the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, are excluded from the value of the taxable service if all the following conditions are satisfied,
(i) the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured;
(ii) the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service;
(iii) the recipient of service is liable to make payment to the third party;
(iv) the recipient of service authorises the service provider to make payment on his behalf;
(v) the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party;
(vi) the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service;
(vii) the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and
(viii) the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account.
8.2 As per Rule 3 of the Valuation Rules, the value of taxable service, where the consideration received is not wholly or partly consisting of money, is determined by the service provider in the following manner :-
(a) the value of such taxable service is equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration;
(b) where the value cannot be determined in accordance with clause (a), the service provider is required to determine the equivalent money value of such consideration which shall, in no case be less than the cost of provision of such taxable service.
8.3 Further, as per Rule 5(1) of the Valuation Rules, where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs are includable in the value for the purpose of charging service tax on the said service.
8.4 However, as per Rule 5(2) of the Valuation Rules, the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, are excluded from the value of the taxable service if all the following conditions are satisfied,
(i) the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured;
(ii) the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service;
(iii) the recipient of service is liable to make payment to the third party;
(iv) the recipient of service authorises the service provider to make payment on his behalf;
(v) the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party;
(vi) the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service;
(vii) the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and
(viii) the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account.
9. Service tax credit
9.1
IPR holder avails many input services in the course of providing intellectual property services to their client. A few examples are Advertising Services, Banking and Other Financial Services, Business Support Services, Chartered Accountants Services, Courier Services, Facsimile Services, Telephone Services and a lot other services which are taxed. IPR holder has to bear the incident if service tax charged on these input services.
9.2
The Cenvat Credit Rules, 2004 provides that intellectual property services provider can take credit of the service tax paid on input services and setoff the same on payment of service tax on output service namely intellectual property services
9.3
in case IPR holder is providing services other than intellectual property services which are not taxed and separate accounts are not maintained for taxable service and exempted service, then he can avail Cenvat credit only up to 20% of his tax liability.
9.4
Similarly, a manufacturer or a service provider can take credit of the service tax paid on intellectual property services and adjust same against his excise duty/ service tax liability.
IPR holder avails many input services in the course of providing intellectual property services to their client. A few examples are Advertising Services, Banking and Other Financial Services, Business Support Services, Chartered Accountants Services, Courier Services, Facsimile Services, Telephone Services and a lot other services which are taxed. IPR holder has to bear the incident if service tax charged on these input services.
9.2
The Cenvat Credit Rules, 2004 provides that intellectual property services provider can take credit of the service tax paid on input services and setoff the same on payment of service tax on output service namely intellectual property services
9.3
in case IPR holder is providing services other than intellectual property services which are not taxed and separate accounts are not maintained for taxable service and exempted service, then he can avail Cenvat credit only up to 20% of his tax liability.
9.4
Similarly, a manufacturer or a service provider can take credit of the service tax paid on intellectual property services and adjust same against his excise duty/ service tax liability.
9. Service tax credit
9.1
IPR holder avails many input services in the course of providing intellectual property services to their client. A few examples are Advertising Services, Banking and Other Financial Services, Business Support Services, Chartered Accountants Services, Courier Services, Facsimile Services, Telephone Services and a lot other services which are taxed. IPR holder has to bear the incident if service tax charged on these input services.
9.2
The Cenvat Credit Rules, 2004 provides that intellectual property services provider can take credit of the service tax paid on input services and setoff the same on payment of service tax on output service namely intellectual property services
9.3
in case IPR holder is providing services other than intellectual property services which are not taxed and separate accounts are not maintained for taxable service and exempted service, then he can avail Cenvat credit only up to 20% of his tax liability.
9.4
Similarly, a manufacturer or a service provider can take credit of the service tax paid on intellectual property services and adjust same against his excise duty/ service tax liability.
IPR holder avails many input services in the course of providing intellectual property services to their client. A few examples are Advertising Services, Banking and Other Financial Services, Business Support Services, Chartered Accountants Services, Courier Services, Facsimile Services, Telephone Services and a lot other services which are taxed. IPR holder has to bear the incident if service tax charged on these input services.
9.2
The Cenvat Credit Rules, 2004 provides that intellectual property services provider can take credit of the service tax paid on input services and setoff the same on payment of service tax on output service namely intellectual property services
9.3
in case IPR holder is providing services other than intellectual property services which are not taxed and separate accounts are not maintained for taxable service and exempted service, then he can avail Cenvat credit only up to 20% of his tax liability.
9.4
Similarly, a manufacturer or a service provider can take credit of the service tax paid on intellectual property services and adjust same against his excise duty/ service tax liability.
10 Rate of Service Tax
Presently Rate of service tax is 12% and education cess @ 2% on service tax is also payable.
However, this rate of tax is up to 28 February 2007 only.
It is expected that rate of tax will be increased to 14% in the next budget.
If you have any query or comment, pl do not hesitate to mail at consult_hardin@yahoo.com. I will be obliged to hear you. Your feedback is always welcome.
THANK YOU
However, this rate of tax is up to 28 February 2007 only.
It is expected that rate of tax will be increased to 14% in the next budget.
If you have any query or comment, pl do not hesitate to mail at consult_hardin@yahoo.com. I will be obliged to hear you. Your feedback is always welcome.
THANK YOU
10 Rate of Service Tax
Presently Rate of service tax is 12% and education cess @ 2% on service tax is also payable.
However, this rate of tax is up to 28 February 2007 only.
It is expected that rate of tax will be increased to 14% in the next budget.
If you have any query or comment, pl do not hesitate to mail at consult_hardin@yahoo.com. I will be obliged to hear you. Your feedback is always welcome.
THANK YOU
However, this rate of tax is up to 28 February 2007 only.
It is expected that rate of tax will be increased to 14% in the next budget.
If you have any query or comment, pl do not hesitate to mail at consult_hardin@yahoo.com. I will be obliged to hear you. Your feedback is always welcome.
THANK YOU
Intellectual Property Service
India is a developing country with a growth rate of about 7 to 9%. Service Industry is developing rapidly than manufacturing sector and growth rate in agricultural sector is the lowest.
To increase the tax base and tape new areas for revenue, Government of India has started imposing Service Tax on designated services since 1994. Initially, a few services were taxed, but over the years, the list of taxable service is expanding and at present 105 services are under tax net.
This blog seeks to demystify the service tax on Intellectual Property Service.
To increase the tax base and tape new areas for revenue, Government of India has started imposing Service Tax on designated services since 1994. Initially, a few services were taxed, but over the years, the list of taxable service is expanding and at present 105 services are under tax net.
This blog seeks to demystify the service tax on Intellectual Property Service.
1. Meaning and Scope
Intellectual property (‘IP’) refers to legal entitlements which are attached to certain types of information, ideas, or other intangibles in their expressed form. The holder of this legal entitlement is generally entitled to exercise various exclusive legal rights in relation to the subject matter of the IP. IP right owner(s) may sell, transfer, assign, licence or permit the right to use of IP to another person for a consideration. Vide Finance Act 2004, IP service has been brought within the ambit of service tax w.e.f. 10 September 2004 to tax the payments received/made toward transfer/acquisition of such rights.
Section 65(105) (zzr) of the Finance Act, 1994 (‘the Finance Act’) seeks to levy service tax on service provided to any person, by the holder of intellectual property right, in relation to intellectual property service.
As per Section 65 (55a) of the Finance Act, “intellectual property right” (‘IPR’) means any right to intangible property, namely, trade marks, designs, patents or any other similar intangible property, under any law for the time being in force, but does not include copyright.
As per Section 65 (55b) of the Finance Act, “intellectual property service” means,
(a) transferring temporarily; or
(b) permitting the use or enjoyment of any intellectual property right
Section 65(105) (zzr) of the Finance Act, 1994 (‘the Finance Act’) seeks to levy service tax on service provided to any person, by the holder of intellectual property right, in relation to intellectual property service.
As per Section 65 (55a) of the Finance Act, “intellectual property right” (‘IPR’) means any right to intangible property, namely, trade marks, designs, patents or any other similar intangible property, under any law for the time being in force, but does not include copyright.
As per Section 65 (55b) of the Finance Act, “intellectual property service” means,
(a) transferring temporarily; or
(b) permitting the use or enjoyment of any intellectual property right
2. Key ingredients
• Service is provided by the holder of IPR
• IPR is recognized under the Indian law
• IPR does not pertains to copyright
• IPR law should be in force at relevant time
• IPR is transferred temporarily or permitted to use without transfer
• Service is provided to a client
• IPR is recognized under the Indian law
• IPR does not pertains to copyright
• IPR law should be in force at relevant time
• IPR is transferred temporarily or permitted to use without transfer
• Service is provided to a client
2.1 IPR holder:
IP reflects the idea that the subject matter is product of the mind or the intellect of a person. Once this fact is recognized by the law, the law protects the right to use and such person becomes the IPR holder and entitled to exclusive rights to use the idea. Generally, the inventor of the idea is the IPR holder. However, as IPRs are transferable, a person who acquires such rights legally may also be an IPR holder, even though he may not be the inventor of such idea. If a person renders intellectual property service for an IPR, to which he is not legal holder, then such service can not be taxed.
2.2 Recognition under Indian law:
IPR should be conferred to a person under Indian law. Service rendered by a person whose IPR is not recognized under Indian law cannot be brought within the ambit of service tax. IP laws in India are listed below:
• The Trade Marks Act, 1999
• The Patent Act, 1970
• The Copyright Act, 1957
• The Design Act, 2000
• The Geographical Indication of Goods (Registration and Protection) Act, 1999
• The Protection of Plant Varieties and Farmers Right Act, 2001
• The Semiconductor Integrated Circuits Layout Design Act, 2000
• The Biological Diversity Act, 2002
• The Trade Marks Act, 1999
• The Patent Act, 1970
• The Copyright Act, 1957
• The Design Act, 2000
• The Geographical Indication of Goods (Registration and Protection) Act, 1999
• The Protection of Plant Varieties and Farmers Right Act, 2001
• The Semiconductor Integrated Circuits Layout Design Act, 2000
• The Biological Diversity Act, 2002
2.2.1 The Trade Marks Act, 1999
The Trade Marks Act, 1999 (‘the Trade Mark Act’) provides for registration and protection of trade marks for goods and services and prevent use of fraudulent marks.
As per Section 2(zb) of the Trade Marks Act, "trade mark" means a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from those of others and may include shape of goods, their packaging and combination of colours.
Under section 18 of the Trade Mark Act, any person claiming to be the proprietor of a trade mark, used or proposed to be used by him, may apply for the registration and on registration, under section 28 thereof, registered proprietor of the trade mark acquires exclusive right to use same in relation to the goods in respect of which the trade mark is registered and to obtain relief in respect of the infringement of the trade mark. As per section 38 of the Trade Marks Act, registered trade marks can be assigned and transmitted to another person and on the registration of such assignment and transmission, such person becomes the proprietor of trade marks or registered proprietor.
As per section 27 of the Trade Marks Act, proprietor of unregistered trade mark does not get any exclusive right of use and therefore he can not be considered as IPR holder. Therefore, only the registered proprietor of the registered trade mark can be considered as IPR holder.
Further, as per section 48 of the Trade Marks Act, a person other than registered proprietor of a trade mark may be registered as the registered user on the execution of a written contract between the registered proprietor and proposed registered user and such registered user will be entitled to use and enjoy the benefit of the trade mark.
As per Section 2(zb) of the Trade Marks Act, "trade mark" means a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from those of others and may include shape of goods, their packaging and combination of colours.
Under section 18 of the Trade Mark Act, any person claiming to be the proprietor of a trade mark, used or proposed to be used by him, may apply for the registration and on registration, under section 28 thereof, registered proprietor of the trade mark acquires exclusive right to use same in relation to the goods in respect of which the trade mark is registered and to obtain relief in respect of the infringement of the trade mark. As per section 38 of the Trade Marks Act, registered trade marks can be assigned and transmitted to another person and on the registration of such assignment and transmission, such person becomes the proprietor of trade marks or registered proprietor.
As per section 27 of the Trade Marks Act, proprietor of unregistered trade mark does not get any exclusive right of use and therefore he can not be considered as IPR holder. Therefore, only the registered proprietor of the registered trade mark can be considered as IPR holder.
Further, as per section 48 of the Trade Marks Act, a person other than registered proprietor of a trade mark may be registered as the registered user on the execution of a written contract between the registered proprietor and proposed registered user and such registered user will be entitled to use and enjoy the benefit of the trade mark.
2.2.2 The Patent Act, 1970
The Patent Act, 1970 (‘the Patent Act’) provides for registration of patent and protection to the inventors from copying the products or adopting the methods by other persons.
As per section 2(j) of the Patent Act, invention means a new product or process involving an inventive step and capable of industrial application. A patent for the invention can be applied by any person who claims to be the true and first inventor of the invention. Once a patent is granted, under section 48 of the Patent Act, the registered proprietor acquires exclusive right to prevent third parties, who do not have his consent, from making, using, offering for sale, selling or importing patented product in India, and using the patented process, or using, selling or importing product in India obtained directly by patented process. As per section 60 of the Patent Act, a patent can be assigned and transmitted to another person and on the registration of such assignment and transmission, such person becomes the proprietor of patent or registered proprietor. The registered proprietors of the patents are the IPR holders.
Under section 70 of the Patent Act, IPR holders have powers to grant licence to make, use, offer for sale, sell or import patented product or use the patented process in India as per the conditions of the written contract.
As per section 2(j) of the Patent Act, invention means a new product or process involving an inventive step and capable of industrial application. A patent for the invention can be applied by any person who claims to be the true and first inventor of the invention. Once a patent is granted, under section 48 of the Patent Act, the registered proprietor acquires exclusive right to prevent third parties, who do not have his consent, from making, using, offering for sale, selling or importing patented product in India, and using the patented process, or using, selling or importing product in India obtained directly by patented process. As per section 60 of the Patent Act, a patent can be assigned and transmitted to another person and on the registration of such assignment and transmission, such person becomes the proprietor of patent or registered proprietor. The registered proprietors of the patents are the IPR holders.
Under section 70 of the Patent Act, IPR holders have powers to grant licence to make, use, offer for sale, sell or import patented product or use the patented process in India as per the conditions of the written contract.
2.2.3 The Copyright Act, 1957
Copyright Act, 1957 (‘the Copyright Act’) is not included within the purview of the IPR as per the definition given in section 65 (55a) of the Finance Act. A literary, dramatic or musical work, a computer programme, an artistic work, a cinematograph film and a sound recording is the subject matter of the Copyright Act.
2.2.4 The Design Act, 2000
The Design Act, 2000 (‘the Design Act’) grants copyright to the designer and prevent piracy of the registered designs.
As per section 2(d) of the Design Act, design means only the features of shape, configuration, pattern, ornament or composition of lines or colours applied to any article whether in two dimensional or three dimensional or in both forms, by any industrial process or means, whether manual mechanical or chemical, separate or combined, which in the finished article appeal to and are judged solely by the eye; but does not include any mode or principle of construction or anything which is in substance a mere mechanical device, and does not include any trade mark or property mark or any artistic work.
As per section 5 of the Design Act, any person claiming to be the proprietor of a design may apply for the registration and on registration the registered proprietor of the design gets the copyright in the design. As per section 30 of the Design Act, a design can be assigned and transmitted to another person and on the registration of such assignment and transmission, such person becomes the proprietor of design or registered proprietor. The registered proprietors of designs are the IPR holders.
Section 22 of the Design Act prohibits application of a registered design or imitation thereof on any article meant for sale or import of any article for sale to which the registered design or imitation thereof has been applied without the consent of the IPR holder.
Under section 30 of the design Act, IPR holders have powers to grant licence to use the registered design as per the conditions of the written contract.
As per section 2(d) of the Design Act, design means only the features of shape, configuration, pattern, ornament or composition of lines or colours applied to any article whether in two dimensional or three dimensional or in both forms, by any industrial process or means, whether manual mechanical or chemical, separate or combined, which in the finished article appeal to and are judged solely by the eye; but does not include any mode or principle of construction or anything which is in substance a mere mechanical device, and does not include any trade mark or property mark or any artistic work.
As per section 5 of the Design Act, any person claiming to be the proprietor of a design may apply for the registration and on registration the registered proprietor of the design gets the copyright in the design. As per section 30 of the Design Act, a design can be assigned and transmitted to another person and on the registration of such assignment and transmission, such person becomes the proprietor of design or registered proprietor. The registered proprietors of designs are the IPR holders.
Section 22 of the Design Act prohibits application of a registered design or imitation thereof on any article meant for sale or import of any article for sale to which the registered design or imitation thereof has been applied without the consent of the IPR holder.
Under section 30 of the design Act, IPR holders have powers to grant licence to use the registered design as per the conditions of the written contract.
2.2.5 The Geographical Indication of Goods (Registration and Protection) Act, 1999
The Geographical Indication of Goods (Registration and Protection) Act, 1999 [‘the GIG Act’] seeks to prevent misuse of well known names traditionally used to indicate and identify some particular produce or articles where a given quality, reputation or other characteristic of such goods is essentially attributable to its geographical origin. Basmati Rice, Kancheevaram Saree, Benaras Saree are some of the geographical indication.
Section 11 of the GIG Act empowers an association of persons to apply for the registration of geographical indication. On the registration of geographical indication, only authorized users are eligible to use geographical indication on their products.
However, as per section 24 of the GIG Act, any right to a registered geographical indication can not be assigned, transmitted or licensed. Therefore, there cannot be any taxable IPR service under the GIG Act.
Section 11 of the GIG Act empowers an association of persons to apply for the registration of geographical indication. On the registration of geographical indication, only authorized users are eligible to use geographical indication on their products.
However, as per section 24 of the GIG Act, any right to a registered geographical indication can not be assigned, transmitted or licensed. Therefore, there cannot be any taxable IPR service under the GIG Act.
2.2.6 The Protection of Plant Varieties and Farmers Right Act, 2001
The Protection of Plant Varieties and Farmers Right Act, 2001 (‘the Plant Varieties Act’), inter alia, seeks to encourage the development of new varieties of plants and protect plant breeders’ right.
As per section 16 of the Plant Varieties Act, any person claiming to be breeder of that variety of plant may seek registration under section 14 thereof and on registration, the breeder is conferred an exclusive right to produce, sell, market, distribute, import or export that variety of plant or seed.
The Plant Varieties Act recognizes assignment of the right and on such assignment, assignee is recognized as breeder. Breeders recognized under the Plant Varieties Act are the IPR holders.
The Plant Varieties Act also permits appointment of agents and licensees to produce, sell, market, distribute, import or export registered plant or seed.
As per section 16 of the Plant Varieties Act, any person claiming to be breeder of that variety of plant may seek registration under section 14 thereof and on registration, the breeder is conferred an exclusive right to produce, sell, market, distribute, import or export that variety of plant or seed.
The Plant Varieties Act recognizes assignment of the right and on such assignment, assignee is recognized as breeder. Breeders recognized under the Plant Varieties Act are the IPR holders.
The Plant Varieties Act also permits appointment of agents and licensees to produce, sell, market, distribute, import or export registered plant or seed.
2.2.7 The Semiconductor Integrated Circuits Layout Design Act, 2000
The Semiconductor Integrated Circuits Layout Design Act, 2000 (‘the IC Design Act’) seeks to protect IPR relating to layout-design (topographies) of the Integrated Circuits (‘IC’) as envisaged under Agreement on Trade Related Aspects of Intellectual Property Rights.
As per section 2(h) of the IC Design Act, layout-design means a layout of transistors and other circuitry elements and includes lead wires connecting such elements and expressed in any manner in a semiconductor IC.
As per section 8 of the IC Design Act, any person claiming to be the creator of a layout-design seek registration reproducing the layout-design in an IC or importing and selling registered layout-design or a IC or an article containing such layout-design will be infringement of the rights of registered proprietor. As per section 20 of the IC Design Act, layout-design rights can be assigned and transmitted and on the registration of such assignment and transmission, such person becomes the proprietor of layout-design. The registered proprietors of layout-designs are the IPR holders.
Under section 25 of the IC Design Act, IPR holders have powers to grant licence to use the registered design as per the conditions of the written contract.
As per section 2(h) of the IC Design Act, layout-design means a layout of transistors and other circuitry elements and includes lead wires connecting such elements and expressed in any manner in a semiconductor IC.
As per section 8 of the IC Design Act, any person claiming to be the creator of a layout-design seek registration reproducing the layout-design in an IC or importing and selling registered layout-design or a IC or an article containing such layout-design will be infringement of the rights of registered proprietor. As per section 20 of the IC Design Act, layout-design rights can be assigned and transmitted and on the registration of such assignment and transmission, such person becomes the proprietor of layout-design. The registered proprietors of layout-designs are the IPR holders.
Under section 25 of the IC Design Act, IPR holders have powers to grant licence to use the registered design as per the conditions of the written contract.
2.2.8 The Biological Diversity Act, 2002
The Biological Diversity Act, 2002 (‘the Bio Diversity Act’) seeks to provide conservation of biological diversity, sustainable use and equitable sharing of the biological resources, knowledge and connected matters. It does not confer any exclusive rights to any person. Hence, there cannot be any taxable service arising under the bio Diversity Act.
2.3 IP law should be in force
As per the definition, the IP law should be in force in India. Provisions pertaining to registration under the Plant Varieties Act and the IC Design Act have not been notified. Therefore, at present, there cannot be any taxable service arising under the Plant Varieties Act and the IC Design Act.
A trade secret (which is sometimes either equated with, or a subset of,"confidential information") is secret, non-public information concerning the commercial practices or proprietary knowledge of a business. However, if such trade secret is not covered by the Indian laws, then it will not be covered under taxable service.
A trade secret (which is sometimes either equated with, or a subset of,"confidential information") is secret, non-public information concerning the commercial practices or proprietary knowledge of a business. However, if such trade secret is not covered by the Indian laws, then it will not be covered under taxable service.
2.4 Temporary transfer of IPR or permission to use without transfer
A person acquires a legal right over the IP when he is recognized as the proprietor under the IP laws. On assignment and transmission, the assignee or the person to whom the rights are transmitted is recognized as the proprietor of the IPR. The service tax is levied when the holder of the IPR provides some service. Hence, consideration received by the original holder on assignment or transmission is not taxable as the IPR is transferred permanently and permanent transfer is not covered within the scope as it amounts to sale and person selling the rights no longer remains a holder of intellectual property rights.
Only a temporary transfer or grant of licence for use of IPR, which does not effect change in the proprietorship of the IPR is within the ambit of service tax.
Traditionally, most of the IPRs are owned by foreigners, who are also registered under Indian laws. It may be possible that they sell their IPRs under Indian laws permanently to their Indian partner and hold the same for rest of the world. In this case, as the Indian buyer becomes the proprietors of the IPR or IPR holder, such transfer will not be within the ambit of service tax, even though, the foreigner is IPR holder in other countries. It is immaterial whether the Indian buyer makes a lump sum payment or pay over a period of time. However, if the payment is made based on the production, it may fall within the ambit of taxable event.
Only a temporary transfer or grant of licence for use of IPR, which does not effect change in the proprietorship of the IPR is within the ambit of service tax.
Traditionally, most of the IPRs are owned by foreigners, who are also registered under Indian laws. It may be possible that they sell their IPRs under Indian laws permanently to their Indian partner and hold the same for rest of the world. In this case, as the Indian buyer becomes the proprietors of the IPR or IPR holder, such transfer will not be within the ambit of service tax, even though, the foreigner is IPR holder in other countries. It is immaterial whether the Indian buyer makes a lump sum payment or pay over a period of time. However, if the payment is made based on the production, it may fall within the ambit of taxable event.
2.5 Service is provided to a client
There should be two parties, one being the service provider and other being service receiver to be a taxable event. If the IPR holder himself uses, produces, manufactures, imports and sell the articles in respect of which IPR has been granted under the law, it will not create a taxable event.
3. Who is liable to pay tax
In most of the cases, service provider, i.e., person who is providing taxable service is liable to pay service tax and, hence, the IPR holder providing services is liable for service tax. However, in few cases, exceptions have been made and the service receiver is made to liable to pay service tax. IP laws in India permits foreigners to seek registration and acquire the IPR. So if an IPR holder providing service is non-resident and does not have address or place of business in India, service tax is payable by person receiving taxable service in India [Rule 2(1) (d) (iv)]. In such a case, person receiving the service will have to register and pay service tax.
4. Valuation
The value of any taxable service is determined as per the provisions of the Service Tax (Determination of Value) Rules, 2006 [‘the Valuation Rules’]. Generally, whenever, the IPR holder grants licence or permits uses of the registered IP, a written agreement specifying the terms, condition and restrictions is required to be registered under the respective IP law and written agreement contains details of the licence fee to be paid by the licensee/registered user to the IPR holder. Therefore, licence fee will be the taxable amount for levy of service tax.
4.1
As per Rule 3 of the Valuation Rules, the value of taxable service, where the consideration received is not wholly or partly consisting of money, is determined by the service provider in the following manner :-
(a) the value of such taxable service is equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration;
(b) where the value cannot be determined in accordance with clause (a), the service provider is required to determine the equivalent money value of such consideration which shall, in no case be less than the cost of provision of such taxable service.
4.2
Further, as per Rule 5(1) of the Valuation Rules, where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs are includable in the value for the purpose of charging service tax on the said service.
4.3
However, as per Rule 5(2) of the Valuation Rules, the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, are excluded from the value of the taxable service if all the following conditions are satisfied,
(i) the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured;
(ii) the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service;
(iii) the recipient of service is liable to make payment to the third party;
(iv) the recipient of service authorises the service provider to make payment on his behalf;
(v) the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party;
(vi) the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service;
(vii) the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and
(viii) the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account.
4.4
The amount of cess paid under the Research and Development Cess Act, 1986 on payment made towards import of technology i.e. royalty or lump sum fee for technical know how or licence fee is exempted from payment of service tax (Notification No. 17/2004-S.T. dated 10-9-2004 refers).
4.1
As per Rule 3 of the Valuation Rules, the value of taxable service, where the consideration received is not wholly or partly consisting of money, is determined by the service provider in the following manner :-
(a) the value of such taxable service is equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration;
(b) where the value cannot be determined in accordance with clause (a), the service provider is required to determine the equivalent money value of such consideration which shall, in no case be less than the cost of provision of such taxable service.
4.2
Further, as per Rule 5(1) of the Valuation Rules, where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs are includable in the value for the purpose of charging service tax on the said service.
4.3
However, as per Rule 5(2) of the Valuation Rules, the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, are excluded from the value of the taxable service if all the following conditions are satisfied,
(i) the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured;
(ii) the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service;
(iii) the recipient of service is liable to make payment to the third party;
(iv) the recipient of service authorises the service provider to make payment on his behalf;
(v) the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party;
(vi) the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service;
(vii) the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and
(viii) the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account.
4.4
The amount of cess paid under the Research and Development Cess Act, 1986 on payment made towards import of technology i.e. royalty or lump sum fee for technical know how or licence fee is exempted from payment of service tax (Notification No. 17/2004-S.T. dated 10-9-2004 refers).
5. Service Tax Credit
IPR holder avails many input services in the course of providing intellectual property services to their client. A few examples are Advertising Services, Banking and Other Financial Services, Business Support Services, Chartered Accountants Services, Courier Services, Facsimile Services, Telephone Services and a lot other services which are taxed. IPR holder has to bear the incident if service tax charged on these input services.
The Cenvat Credit Rules, 2004 provides that intellectual property services provider can take credit of the service tax paid on input services and setoff the same on payment of service tax on output service namely intellectual property services
in case IPR holder is providing services other than intellectual property services which are not taxed and seperate accounts are not maintained for taxable service and exempted service, then he can avail Cenvat credit only up to 20% of his tax liability.
Similarly, a manufacturer or a service provider can take credit of the service tax paid on intellectual property services and adjust same against his excise duty/ service tax liability.
The Cenvat Credit Rules, 2004 provides that intellectual property services provider can take credit of the service tax paid on input services and setoff the same on payment of service tax on output service namely intellectual property services
in case IPR holder is providing services other than intellectual property services which are not taxed and seperate accounts are not maintained for taxable service and exempted service, then he can avail Cenvat credit only up to 20% of his tax liability.
Similarly, a manufacturer or a service provider can take credit of the service tax paid on intellectual property services and adjust same against his excise duty/ service tax liability.
6. Rate of Service Tax
Presently Rate of service tax is 12% and education cess @ 2% on service tax is also payable.
However, this rate of tax is up to 28 February 2007 only.
It is expected that rate of tax will be increased to 14% in the next budget.
If you have any query or comment, pl do not hesitate to mail at consult_hardin@yahoo.com. I will be obliged to hear you. Your feedback is always welcome.
THANK YOU
However, this rate of tax is up to 28 February 2007 only.
It is expected that rate of tax will be increased to 14% in the next budget.
If you have any query or comment, pl do not hesitate to mail at consult_hardin@yahoo.com. I will be obliged to hear you. Your feedback is always welcome.
THANK YOU
14. Rate of Service Tax
Presently Rate of service tax is 12%, and education cess @ 2% and secondary and higher education cess @1% on service tax is also payable. Effective rate is 12.36%
14. Rate of Service Tax
Presently Rate of service tax is 12%, and education cess @ 2% and secondary and higher education cess @1% on service tax is also payable. Effective rate is 12.36%
Friday, December 22, 2006
13. List of disciplines of science
• Acoustical engineering
• Aquatic and environmental engineering
• Aerospace engineering
• Agricultural engineering
• Architectural engineering
• Audio engineering
• Automotive engineering (automotive systems engineering)
• Behavioral engineering
• Biological engineering
• Biomedical engineering
• Biomaterials engineering
• Bioresource engineering
• Ceramic engineering
• Chemical engineering
• Civil engineering
• Coastal engineering
• Combat engineering
• Communications system engineering
• Construction engineering
• Control engineering (control systems engineering)
• Ecological engineering
• Electrical engineering
• Electronics engineering (includes microelectronics engineering, microelectronics and semiconductor engineering)
• Electromechanical engineering
• Engineering science and mechanics
• Engineering physics (engineering science)
• Environmental engineering
• Computational finance (financial engineering)
• Fire protection engineering
• Food process engineering
• Forensic engineering
• Forest engineering
• Genetic engineering
• Geomatics engineering
• Geotechnical engineering
• Industrial engineering (includes production engineering)
• Information engineering
• Instrumentation engineering
• Integrated engineering
• Industrial engineering (includes manufacturing engineering)
• Landscape engineering
• Marine engineering
• Materials engineering (includes metallurgical engineering)
• Mechanical engineering
• Mechatronics
• Microsystems engineering
• Military engineering
• Minerals process engineering
• Mineral engineering
• Mining engineering
• Nanoengineering
• Neural engineering
• Nuclear engineering
• Optical engineering
• Ocean engineering
• Paper engineering
• Photovoltaics engineering
• Petroleum engineering
• Plastics engineering
• Process engineering
• Quality engineering (quality assurance engineering)
• Reliability engineering
• Safety engineering
• Security engineering
• Sewage engineering
• Structural engineering
• Systems engineering (systems design engineering)
• Traffic engineering
• Transportation engineering (transport engineering)
• Vacuum engineering
• Value engineering
• Aquatic and environmental engineering
• Aerospace engineering
• Agricultural engineering
• Architectural engineering
• Audio engineering
• Automotive engineering (automotive systems engineering)
• Behavioral engineering
• Biological engineering
• Biomedical engineering
• Biomaterials engineering
• Bioresource engineering
• Ceramic engineering
• Chemical engineering
• Civil engineering
• Coastal engineering
• Combat engineering
• Communications system engineering
• Construction engineering
• Control engineering (control systems engineering)
• Ecological engineering
• Electrical engineering
• Electronics engineering (includes microelectronics engineering, microelectronics and semiconductor engineering)
• Electromechanical engineering
• Engineering science and mechanics
• Engineering physics (engineering science)
• Environmental engineering
• Computational finance (financial engineering)
• Fire protection engineering
• Food process engineering
• Forensic engineering
• Forest engineering
• Genetic engineering
• Geomatics engineering
• Geotechnical engineering
• Industrial engineering (includes production engineering)
• Information engineering
• Instrumentation engineering
• Integrated engineering
• Industrial engineering (includes manufacturing engineering)
• Landscape engineering
• Marine engineering
• Materials engineering (includes metallurgical engineering)
• Mechanical engineering
• Mechatronics
• Microsystems engineering
• Military engineering
• Minerals process engineering
• Mineral engineering
• Mining engineering
• Nanoengineering
• Neural engineering
• Nuclear engineering
• Optical engineering
• Ocean engineering
• Paper engineering
• Photovoltaics engineering
• Petroleum engineering
• Plastics engineering
• Process engineering
• Quality engineering (quality assurance engineering)
• Reliability engineering
• Safety engineering
• Security engineering
• Sewage engineering
• Structural engineering
• Systems engineering (systems design engineering)
• Traffic engineering
• Transportation engineering (transport engineering)
• Vacuum engineering
• Value engineering
13. List of disciplines of science
• Acoustical engineering
• Aquatic and environmental engineering
• Aerospace engineering
• Agricultural engineering
• Architectural engineering
• Audio engineering
• Automotive engineering (automotive systems engineering)
• Behavioral engineering
• Biological engineering
• Biomedical engineering
• Biomaterials engineering
• Bioresource engineering
• Ceramic engineering
• Chemical engineering
• Civil engineering
• Coastal engineering
• Combat engineering
• Communications system engineering
• Construction engineering
• Control engineering (control systems engineering)
• Ecological engineering
• Electrical engineering
• Electronics engineering (includes microelectronics engineering, microelectronics and semiconductor engineering)
• Electromechanical engineering
• Engineering science and mechanics
• Engineering physics (engineering science)
• Environmental engineering
• Computational finance (financial engineering)
• Fire protection engineering
• Food process engineering
• Forensic engineering
• Forest engineering
• Genetic engineering
• Geomatics engineering
• Geotechnical engineering
• Industrial engineering (includes production engineering)
• Information engineering
• Instrumentation engineering
• Integrated engineering
• Industrial engineering (includes manufacturing engineering)
• Landscape engineering
• Marine engineering
• Materials engineering (includes metallurgical engineering)
• Mechanical engineering
• Mechatronics
• Microsystems engineering
• Military engineering
• Minerals process engineering
• Mineral engineering
• Mining engineering
• Nanoengineering
• Neural engineering
• Nuclear engineering
• Optical engineering
• Ocean engineering
• Paper engineering
• Photovoltaics engineering
• Petroleum engineering
• Plastics engineering
• Process engineering
• Quality engineering (quality assurance engineering)
• Reliability engineering
• Safety engineering
• Security engineering
• Sewage engineering
• Structural engineering
• Systems engineering (systems design engineering)
• Traffic engineering
• Transportation engineering (transport engineering)
• Vacuum engineering
• Value engineering
• Aquatic and environmental engineering
• Aerospace engineering
• Agricultural engineering
• Architectural engineering
• Audio engineering
• Automotive engineering (automotive systems engineering)
• Behavioral engineering
• Biological engineering
• Biomedical engineering
• Biomaterials engineering
• Bioresource engineering
• Ceramic engineering
• Chemical engineering
• Civil engineering
• Coastal engineering
• Combat engineering
• Communications system engineering
• Construction engineering
• Control engineering (control systems engineering)
• Ecological engineering
• Electrical engineering
• Electronics engineering (includes microelectronics engineering, microelectronics and semiconductor engineering)
• Electromechanical engineering
• Engineering science and mechanics
• Engineering physics (engineering science)
• Environmental engineering
• Computational finance (financial engineering)
• Fire protection engineering
• Food process engineering
• Forensic engineering
• Forest engineering
• Genetic engineering
• Geomatics engineering
• Geotechnical engineering
• Industrial engineering (includes production engineering)
• Information engineering
• Instrumentation engineering
• Integrated engineering
• Industrial engineering (includes manufacturing engineering)
• Landscape engineering
• Marine engineering
• Materials engineering (includes metallurgical engineering)
• Mechanical engineering
• Mechatronics
• Microsystems engineering
• Military engineering
• Minerals process engineering
• Mineral engineering
• Mining engineering
• Nanoengineering
• Neural engineering
• Nuclear engineering
• Optical engineering
• Ocean engineering
• Paper engineering
• Photovoltaics engineering
• Petroleum engineering
• Plastics engineering
• Process engineering
• Quality engineering (quality assurance engineering)
• Reliability engineering
• Safety engineering
• Security engineering
• Sewage engineering
• Structural engineering
• Systems engineering (systems design engineering)
• Traffic engineering
• Transportation engineering (transport engineering)
• Vacuum engineering
• Value engineering
12. Service tax credit
12.1
Consulting engineers avails many input services in the course of providing consulting services to their client. A few examples are Advertising Services, Banking and Other Financial Services, Business Support Services, Chartered Accountants Services, Courier Services, Facsimile Services, Telephone Services and a lot other services which are taxed. The Consulting engineers has to bear the incident if service tax charged on these input services.
The Cenvat Credit Rules, 2004 provides that Consulting engineers can take credit of the service tax paid on input services and setoff the same on payment of service tax on output service namely Consulting Engineers Service
12.2
in case Consulting engineers is providing services other than Consulting engineers which are not taxed and seperate accounts are not maintained for taxable service and exempted service, then he can avail Cenvat credit only up to 20% of his tax liability.
12.3
Similarly, a manufacturer or a service provider can take credit of the service tax paid on Consulting engineers services and adjust same against his excise duty/ service tax liability.
Consulting engineers avails many input services in the course of providing consulting services to their client. A few examples are Advertising Services, Banking and Other Financial Services, Business Support Services, Chartered Accountants Services, Courier Services, Facsimile Services, Telephone Services and a lot other services which are taxed. The Consulting engineers has to bear the incident if service tax charged on these input services.
The Cenvat Credit Rules, 2004 provides that Consulting engineers can take credit of the service tax paid on input services and setoff the same on payment of service tax on output service namely Consulting Engineers Service
12.2
in case Consulting engineers is providing services other than Consulting engineers which are not taxed and seperate accounts are not maintained for taxable service and exempted service, then he can avail Cenvat credit only up to 20% of his tax liability.
12.3
Similarly, a manufacturer or a service provider can take credit of the service tax paid on Consulting engineers services and adjust same against his excise duty/ service tax liability.
12. Service tax credit
12.1
Consulting engineers avails many input services in the course of providing consulting services to their client. A few examples are Advertising Services, Banking and Other Financial Services, Business Support Services, Chartered Accountants Services, Courier Services, Facsimile Services, Telephone Services and a lot other services which are taxed. The Consulting engineers has to bear the incident if service tax charged on these input services.
The Cenvat Credit Rules, 2004 provides that Consulting engineers can take credit of the service tax paid on input services and setoff the same on payment of service tax on output service namely Consulting Engineers Service
12.2
in case Consulting engineers is providing services other than Consulting engineers which are not taxed and seperate accounts are not maintained for taxable service and exempted service, then he can avail Cenvat credit only up to 20% of his tax liability.
12.3
Similarly, a manufacturer or a service provider can take credit of the service tax paid on Consulting engineers services and adjust same against his excise duty/ service tax liability.
Consulting engineers avails many input services in the course of providing consulting services to their client. A few examples are Advertising Services, Banking and Other Financial Services, Business Support Services, Chartered Accountants Services, Courier Services, Facsimile Services, Telephone Services and a lot other services which are taxed. The Consulting engineers has to bear the incident if service tax charged on these input services.
The Cenvat Credit Rules, 2004 provides that Consulting engineers can take credit of the service tax paid on input services and setoff the same on payment of service tax on output service namely Consulting Engineers Service
12.2
in case Consulting engineers is providing services other than Consulting engineers which are not taxed and seperate accounts are not maintained for taxable service and exempted service, then he can avail Cenvat credit only up to 20% of his tax liability.
12.3
Similarly, a manufacturer or a service provider can take credit of the service tax paid on Consulting engineers services and adjust same against his excise duty/ service tax liability.
11. Some of the other services which are not within the mischief of consulting engineer service
11.1
Services in relation to research and development activity
In case of CCE v. MRF Ltd. (Chennai), it was held by the Tribunal that the services provided by the foreign company to the respondent were for its research and development activity with regard to automotive tyres, and were, therefore, in the nature of scientific and technical consultancy service and not the consulting engineer service.
‘Scientific and technical consultancy services’ has been introduced as a new service for purpose of levy of service tax with effect from 16-7-2001.
11.2
Annual maintenance contract services
In case of Roots Multiclean Ltd. v. CCE, the appellant, manufacturer of floor cleaning machines, used to offer warranty period of one year, beyond which they used to enter into Annual Maintenance Contracts (AMC) with their buyers for repair and maintenance of machines sold. The tribunal held that, ‘engineering consultancy service’ is an intangible service. But the service rendered by the appellants during the period of dispute was a tangible service, in as much as they were physically repairing or maintaining the machines, which could be hardly equated with intangible services such as advice, consultancy, etc. It would follow that the repair and maintenance of machines undertaken by the appellants under AMCs with their buyers beyond the warranty period were not covered by ‘Engineering Consultancy Service’.
The activity became taxable service only with effect from 1-7-2003 when separate entry was included.
11.3
Planning of building, preparation of land map, property valuation
In case of CCE v. Rabindra Dass, assessee, the tribunal has held that the functions performed by a civil engineer i.e. planning of building, preparation of land map, preparation of ground plan of factory, stability certificate, installed capacity assessment and property valuation fall within the purview of the term ‘consulting engineer’.
The above view has been upheld by the High Court of Madras in the matter of Shanmugavel v. CCE. Chennai 2001 (131) ELT 14 (Mad.) wherein it was held that valuers of plant and machinery being professionally qualified engineers, be regarded as ‘consulting engineers’ and services rendered by them are liable to service tax”.
11.4
Manpower supply services
In case of SPIC-SMO Ltd. v. CCE, the tribunal has held that the appellant was only supplying manpower in view of the surplus technical manpower which the appellant had therefore, the finding that the appellant was rendering consulting engineer service was not sustainable and no service tax was to be demanded.
The above service will now be covered by the Manpower recruitment or supply agency services with effect from 16-06-2005.
Services in relation to research and development activity
In case of CCE v. MRF Ltd. (Chennai), it was held by the Tribunal that the services provided by the foreign company to the respondent were for its research and development activity with regard to automotive tyres, and were, therefore, in the nature of scientific and technical consultancy service and not the consulting engineer service.
‘Scientific and technical consultancy services’ has been introduced as a new service for purpose of levy of service tax with effect from 16-7-2001.
11.2
Annual maintenance contract services
In case of Roots Multiclean Ltd. v. CCE, the appellant, manufacturer of floor cleaning machines, used to offer warranty period of one year, beyond which they used to enter into Annual Maintenance Contracts (AMC) with their buyers for repair and maintenance of machines sold. The tribunal held that, ‘engineering consultancy service’ is an intangible service. But the service rendered by the appellants during the period of dispute was a tangible service, in as much as they were physically repairing or maintaining the machines, which could be hardly equated with intangible services such as advice, consultancy, etc. It would follow that the repair and maintenance of machines undertaken by the appellants under AMCs with their buyers beyond the warranty period were not covered by ‘Engineering Consultancy Service’.
The activity became taxable service only with effect from 1-7-2003 when separate entry was included.
11.3
Planning of building, preparation of land map, property valuation
In case of CCE v. Rabindra Dass, assessee, the tribunal has held that the functions performed by a civil engineer i.e. planning of building, preparation of land map, preparation of ground plan of factory, stability certificate, installed capacity assessment and property valuation fall within the purview of the term ‘consulting engineer’.
The above view has been upheld by the High Court of Madras in the matter of Shanmugavel v. CCE. Chennai 2001 (131) ELT 14 (Mad.) wherein it was held that valuers of plant and machinery being professionally qualified engineers, be regarded as ‘consulting engineers’ and services rendered by them are liable to service tax”.
11.4
Manpower supply services
In case of SPIC-SMO Ltd. v. CCE, the tribunal has held that the appellant was only supplying manpower in view of the surplus technical manpower which the appellant had therefore, the finding that the appellant was rendering consulting engineer service was not sustainable and no service tax was to be demanded.
The above service will now be covered by the Manpower recruitment or supply agency services with effect from 16-06-2005.
11. Some of the other services which are not within the mischief of consulting engineer service
11.1
Services in relation to research and development activity
In case of CCE v. MRF Ltd. (Chennai), it was held by the Tribunal that the services provided by the foreign company to the respondent were for its research and development activity with regard to automotive tyres, and were, therefore, in the nature of scientific and technical consultancy service and not the consulting engineer service.
‘Scientific and technical consultancy services’ has been introduced as a new service for purpose of levy of service tax with effect from 16-7-2001.
11.2
Annual maintenance contract services
In case of Roots Multiclean Ltd. v. CCE, the appellant, manufacturer of floor cleaning machines, used to offer warranty period of one year, beyond which they used to enter into Annual Maintenance Contracts (AMC) with their buyers for repair and maintenance of machines sold. The tribunal held that, ‘engineering consultancy service’ is an intangible service. But the service rendered by the appellants during the period of dispute was a tangible service, in as much as they were physically repairing or maintaining the machines, which could be hardly equated with intangible services such as advice, consultancy, etc. It would follow that the repair and maintenance of machines undertaken by the appellants under AMCs with their buyers beyond the warranty period were not covered by ‘Engineering Consultancy Service’.
The activity became taxable service only with effect from 1-7-2003 when separate entry was included.
11.3
Planning of building, preparation of land map, property valuation
In case of CCE v. Rabindra Dass, assessee, the tribunal has held that the functions performed by a civil engineer i.e. planning of building, preparation of land map, preparation of ground plan of factory, stability certificate, installed capacity assessment and property valuation fall within the purview of the term ‘consulting engineer’.
The above view has been upheld by the High Court of Madras in the matter of Shanmugavel v. CCE. Chennai 2001 (131) ELT 14 (Mad.) wherein it was held that valuers of plant and machinery being professionally qualified engineers, be regarded as ‘consulting engineers’ and services rendered by them are liable to service tax”.
11.4
Manpower supply services
In case of SPIC-SMO Ltd. v. CCE, the tribunal has held that the appellant was only supplying manpower in view of the surplus technical manpower which the appellant had therefore, the finding that the appellant was rendering consulting engineer service was not sustainable and no service tax was to be demanded.
The above service will now be covered by the Manpower recruitment or supply agency services with effect from 16-06-2005.
Services in relation to research and development activity
In case of CCE v. MRF Ltd. (Chennai), it was held by the Tribunal that the services provided by the foreign company to the respondent were for its research and development activity with regard to automotive tyres, and were, therefore, in the nature of scientific and technical consultancy service and not the consulting engineer service.
‘Scientific and technical consultancy services’ has been introduced as a new service for purpose of levy of service tax with effect from 16-7-2001.
11.2
Annual maintenance contract services
In case of Roots Multiclean Ltd. v. CCE, the appellant, manufacturer of floor cleaning machines, used to offer warranty period of one year, beyond which they used to enter into Annual Maintenance Contracts (AMC) with their buyers for repair and maintenance of machines sold. The tribunal held that, ‘engineering consultancy service’ is an intangible service. But the service rendered by the appellants during the period of dispute was a tangible service, in as much as they were physically repairing or maintaining the machines, which could be hardly equated with intangible services such as advice, consultancy, etc. It would follow that the repair and maintenance of machines undertaken by the appellants under AMCs with their buyers beyond the warranty period were not covered by ‘Engineering Consultancy Service’.
The activity became taxable service only with effect from 1-7-2003 when separate entry was included.
11.3
Planning of building, preparation of land map, property valuation
In case of CCE v. Rabindra Dass, assessee, the tribunal has held that the functions performed by a civil engineer i.e. planning of building, preparation of land map, preparation of ground plan of factory, stability certificate, installed capacity assessment and property valuation fall within the purview of the term ‘consulting engineer’.
The above view has been upheld by the High Court of Madras in the matter of Shanmugavel v. CCE. Chennai 2001 (131) ELT 14 (Mad.) wherein it was held that valuers of plant and machinery being professionally qualified engineers, be regarded as ‘consulting engineers’ and services rendered by them are liable to service tax”.
11.4
Manpower supply services
In case of SPIC-SMO Ltd. v. CCE, the tribunal has held that the appellant was only supplying manpower in view of the surplus technical manpower which the appellant had therefore, the finding that the appellant was rendering consulting engineer service was not sustainable and no service tax was to be demanded.
The above service will now be covered by the Manpower recruitment or supply agency services with effect from 16-06-2005.
10. Valuation
10.1
The value of any taxable service is determined as per the provisions of the Service Tax (Determination of Value) Rules, 2006 [‘the Valuation Rules’].
10.2
As per Rule 3 of the Valuation Rules, the value of taxable service, where the consideration received is not wholly or partly consisting of money, is determined by the service provider in the following manner :-
(a) the value of such taxable service is equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration;
(b) where the value cannot be determined in accordance with clause (a), the service provider is required to determine the equivalent money value of such consideration which shall, in no case be less than the cost of provision of such taxable service.
10.3
Further, as per Rule 5(1) of the Valuation Rules, where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs are includable in the value for the purpose of charging service tax on the said service.
10.4
However, as per Rule 5(2) of the Valuation Rules, the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, are excluded from the value of the taxable service if all the following conditions are satisfied,
(i) the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured;
(ii) the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service;
(iii) the recipient of service is liable to make payment to the third party;
(iv) the recipient of service authorises the service provider to make payment on his behalf;
(v) the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party;
(vi) the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service;
(vii) the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and
(viii) the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account.
10.3
At times, an engineering firm will be providing both engineering services and architectural services and a lump sum amount is charged for both the services. In Trade Notice No. 1/98-ST, dated 5-1-1998, it has been clarified that in such cases, service tax will have to be collected on the entire amount charged. However, if separate break-up is given in the bill for engineering services and architectural services, then service tax needs to be paid only on the charges for engineering services.
The value of any taxable service is determined as per the provisions of the Service Tax (Determination of Value) Rules, 2006 [‘the Valuation Rules’].
10.2
As per Rule 3 of the Valuation Rules, the value of taxable service, where the consideration received is not wholly or partly consisting of money, is determined by the service provider in the following manner :-
(a) the value of such taxable service is equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration;
(b) where the value cannot be determined in accordance with clause (a), the service provider is required to determine the equivalent money value of such consideration which shall, in no case be less than the cost of provision of such taxable service.
10.3
Further, as per Rule 5(1) of the Valuation Rules, where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs are includable in the value for the purpose of charging service tax on the said service.
10.4
However, as per Rule 5(2) of the Valuation Rules, the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, are excluded from the value of the taxable service if all the following conditions are satisfied,
(i) the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured;
(ii) the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service;
(iii) the recipient of service is liable to make payment to the third party;
(iv) the recipient of service authorises the service provider to make payment on his behalf;
(v) the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party;
(vi) the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service;
(vii) the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and
(viii) the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account.
10.3
At times, an engineering firm will be providing both engineering services and architectural services and a lump sum amount is charged for both the services. In Trade Notice No. 1/98-ST, dated 5-1-1998, it has been clarified that in such cases, service tax will have to be collected on the entire amount charged. However, if separate break-up is given in the bill for engineering services and architectural services, then service tax needs to be paid only on the charges for engineering services.
10. Valuation
10.1
The value of any taxable service is determined as per the provisions of the Service Tax (Determination of Value) Rules, 2006 [‘the Valuation Rules’].
10.2
As per Rule 3 of the Valuation Rules, the value of taxable service, where the consideration received is not wholly or partly consisting of money, is determined by the service provider in the following manner :-
(a) the value of such taxable service is equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration;
(b) where the value cannot be determined in accordance with clause (a), the service provider is required to determine the equivalent money value of such consideration which shall, in no case be less than the cost of provision of such taxable service.
10.3
Further, as per Rule 5(1) of the Valuation Rules, where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs are includable in the value for the purpose of charging service tax on the said service.
10.4
However, as per Rule 5(2) of the Valuation Rules, the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, are excluded from the value of the taxable service if all the following conditions are satisfied,
(i) the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured;
(ii) the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service;
(iii) the recipient of service is liable to make payment to the third party;
(iv) the recipient of service authorises the service provider to make payment on his behalf;
(v) the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party;
(vi) the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service;
(vii) the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and
(viii) the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account.
10.3
At times, an engineering firm will be providing both engineering services and architectural services and a lump sum amount is charged for both the services. In Trade Notice No. 1/98-ST, dated 5-1-1998, it has been clarified that in such cases, service tax will have to be collected on the entire amount charged. However, if separate break-up is given in the bill for engineering services and architectural services, then service tax needs to be paid only on the charges for engineering services.
The value of any taxable service is determined as per the provisions of the Service Tax (Determination of Value) Rules, 2006 [‘the Valuation Rules’].
10.2
As per Rule 3 of the Valuation Rules, the value of taxable service, where the consideration received is not wholly or partly consisting of money, is determined by the service provider in the following manner :-
(a) the value of such taxable service is equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration;
(b) where the value cannot be determined in accordance with clause (a), the service provider is required to determine the equivalent money value of such consideration which shall, in no case be less than the cost of provision of such taxable service.
10.3
Further, as per Rule 5(1) of the Valuation Rules, where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs are includable in the value for the purpose of charging service tax on the said service.
10.4
However, as per Rule 5(2) of the Valuation Rules, the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, are excluded from the value of the taxable service if all the following conditions are satisfied,
(i) the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured;
(ii) the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service;
(iii) the recipient of service is liable to make payment to the third party;
(iv) the recipient of service authorises the service provider to make payment on his behalf;
(v) the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party;
(vi) the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service;
(vii) the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and
(viii) the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account.
10.3
At times, an engineering firm will be providing both engineering services and architectural services and a lump sum amount is charged for both the services. In Trade Notice No. 1/98-ST, dated 5-1-1998, it has been clarified that in such cases, service tax will have to be collected on the entire amount charged. However, if separate break-up is given in the bill for engineering services and architectural services, then service tax needs to be paid only on the charges for engineering services.
9. Classification of Service
Presently 105 services are within the service tax ambit and every year new services are brought under the service tax net. There are many services which are overlapping in nature and it is possible that one particular service can be classified under more than one category
9.1
Following are a few services which compete with Consulting engineers Service:
· Architect’s Service
· Construction service
· Erection, commissioning or installation service
· Insurance auxiliary service
· Intellectual property service
· Interior decorators service
· Scientific or technical consultancy service
· Survey and exploration of minerals service
· Survey and map making service
· Technical inspection and certification service
· Technical testing and analysis service
9.2
As per section 65A(2) of the Finance Act, where, a taxable service is, prima facie, classifiable under two or more categories, classification should be effected as in the following manner:-
(a) Category of service which provides the most specific description should be preferred to general description;
(b) composite services consisting of a combination of different services which cannot be classified in the manner specified in clause (a), should be classified as if they consisted of a service which gives them their essential character,
(c) when a service cannot be classified in the manner specified above, it should be classified under the category which occurs first among the categories which equally merit consideration.
9.3
A consulting engineer may also provide architect service while providing services exigible to ‘consulting engineer service’. In such case, whether architect service is taxable in the hands of consulting engineers. As aforesaid, the Board has clarified that architect service does not fall within the ambit of ‘consulting engineer service’. Therefore, it has to be seen whether architect service provided by consulting engineer is exigible to ‘architect service’. As per section 65(6) of the Finance Act, an ‘architect’ means a person whose name is entered in the register of architects maintained under section 23 of the Architects Act, 1972. Hence, if the consulting engineer is not registered as architect, his architect service cannot be taxed under ‘‘architect service’ also.
9.1
Following are a few services which compete with Consulting engineers Service:
· Architect’s Service
· Construction service
· Erection, commissioning or installation service
· Insurance auxiliary service
· Intellectual property service
· Interior decorators service
· Scientific or technical consultancy service
· Survey and exploration of minerals service
· Survey and map making service
· Technical inspection and certification service
· Technical testing and analysis service
9.2
As per section 65A(2) of the Finance Act, where, a taxable service is, prima facie, classifiable under two or more categories, classification should be effected as in the following manner:-
(a) Category of service which provides the most specific description should be preferred to general description;
(b) composite services consisting of a combination of different services which cannot be classified in the manner specified in clause (a), should be classified as if they consisted of a service which gives them their essential character,
(c) when a service cannot be classified in the manner specified above, it should be classified under the category which occurs first among the categories which equally merit consideration.
9.3
A consulting engineer may also provide architect service while providing services exigible to ‘consulting engineer service’. In such case, whether architect service is taxable in the hands of consulting engineers. As aforesaid, the Board has clarified that architect service does not fall within the ambit of ‘consulting engineer service’. Therefore, it has to be seen whether architect service provided by consulting engineer is exigible to ‘architect service’. As per section 65(6) of the Finance Act, an ‘architect’ means a person whose name is entered in the register of architects maintained under section 23 of the Architects Act, 1972. Hence, if the consulting engineer is not registered as architect, his architect service cannot be taxed under ‘‘architect service’ also.
9. Classification of Service
Presently 105 services are within the service tax ambit and every year new services are brought under the service tax net. There are many services which are overlapping in nature and it is possible that one particular service can be classified under more than one category
9.1
Following are a few services which compete with Consulting engineers Service:
· Architect’s Service
· Construction service
· Erection, commissioning or installation service
· Insurance auxiliary service
· Intellectual property service
· Interior decorators service
· Scientific or technical consultancy service
· Survey and exploration of minerals service
· Survey and map making service
· Technical inspection and certification service
· Technical testing and analysis service
9.2
As per section 65A(2) of the Finance Act, where, a taxable service is, prima facie, classifiable under two or more categories, classification should be effected as in the following manner:-
(a) Category of service which provides the most specific description should be preferred to general description;
(b) composite services consisting of a combination of different services which cannot be classified in the manner specified in clause (a), should be classified as if they consisted of a service which gives them their essential character,
(c) when a service cannot be classified in the manner specified above, it should be classified under the category which occurs first among the categories which equally merit consideration.
9.3
A consulting engineer may also provide architect service while providing services exigible to ‘consulting engineer service’. In such case, whether architect service is taxable in the hands of consulting engineers. As aforesaid, the Board has clarified that architect service does not fall within the ambit of ‘consulting engineer service’. Therefore, it has to be seen whether architect service provided by consulting engineer is exigible to ‘architect service’. As per section 65(6) of the Finance Act, an ‘architect’ means a person whose name is entered in the register of architects maintained under section 23 of the Architects Act, 1972. Hence, if the consulting engineer is not registered as architect, his architect service cannot be taxed under ‘‘architect service’ also.
9.1
Following are a few services which compete with Consulting engineers Service:
· Architect’s Service
· Construction service
· Erection, commissioning or installation service
· Insurance auxiliary service
· Intellectual property service
· Interior decorators service
· Scientific or technical consultancy service
· Survey and exploration of minerals service
· Survey and map making service
· Technical inspection and certification service
· Technical testing and analysis service
9.2
As per section 65A(2) of the Finance Act, where, a taxable service is, prima facie, classifiable under two or more categories, classification should be effected as in the following manner:-
(a) Category of service which provides the most specific description should be preferred to general description;
(b) composite services consisting of a combination of different services which cannot be classified in the manner specified in clause (a), should be classified as if they consisted of a service which gives them their essential character,
(c) when a service cannot be classified in the manner specified above, it should be classified under the category which occurs first among the categories which equally merit consideration.
9.3
A consulting engineer may also provide architect service while providing services exigible to ‘consulting engineer service’. In such case, whether architect service is taxable in the hands of consulting engineers. As aforesaid, the Board has clarified that architect service does not fall within the ambit of ‘consulting engineer service’. Therefore, it has to be seen whether architect service provided by consulting engineer is exigible to ‘architect service’. As per section 65(6) of the Finance Act, an ‘architect’ means a person whose name is entered in the register of architects maintained under section 23 of the Architects Act, 1972. Hence, if the consulting engineer is not registered as architect, his architect service cannot be taxed under ‘‘architect service’ also.
8. Who is liable to pay service tax?
8.1
In most of the cases, service provider, i.e., person who is providing taxable service is liable to pay service tax and, hence, the consulting engineer or firm or body corporate providing services is liable for service tax. However, in few cases, exceptions have been made and the service receiver is made to liable to pay service tax. By Finance Act, 1999 it has been provided that if a person providing service is non-resident and does not have address or place of business in India, service tax is payable by person receiving taxable service in India [Rule 2(1)(d)(iv)]. The amendment has come in effect from 11 May 1999. In such a case, person receiving the service will also have to register.
8.2
If a person pays service tax, which he was not liable to pay in the first place, he is entitled for a refund provided refund claim has been filed within the prescribed time[1].
[1] CCE vs Ambuja Cement Eastern Ltd;
In most of the cases, service provider, i.e., person who is providing taxable service is liable to pay service tax and, hence, the consulting engineer or firm or body corporate providing services is liable for service tax. However, in few cases, exceptions have been made and the service receiver is made to liable to pay service tax. By Finance Act, 1999 it has been provided that if a person providing service is non-resident and does not have address or place of business in India, service tax is payable by person receiving taxable service in India [Rule 2(1)(d)(iv)]. The amendment has come in effect from 11 May 1999. In such a case, person receiving the service will also have to register.
8.2
If a person pays service tax, which he was not liable to pay in the first place, he is entitled for a refund provided refund claim has been filed within the prescribed time[1].
[1] CCE vs Ambuja Cement Eastern Ltd;
8. Who is liable to pay service tax?
8.1
In most of the cases, service provider, i.e., person who is providing taxable service is liable to pay service tax and, hence, the consulting engineer or firm or body corporate providing services is liable for service tax. However, in few cases, exceptions have been made and the service receiver is made to liable to pay service tax. By Finance Act, 1999 it has been provided that if a person providing service is non-resident and does not have address or place of business in India, service tax is payable by person receiving taxable service in India [Rule 2(1)(d)(iv)]. The amendment has come in effect from 11 May 1999. In such a case, person receiving the service will also have to register.
8.2
If a person pays service tax, which he was not liable to pay in the first place, he is entitled for a refund provided refund claim has been filed within the prescribed time[1].
[1] CCE vs Ambuja Cement Eastern Ltd;
In most of the cases, service provider, i.e., person who is providing taxable service is liable to pay service tax and, hence, the consulting engineer or firm or body corporate providing services is liable for service tax. However, in few cases, exceptions have been made and the service receiver is made to liable to pay service tax. By Finance Act, 1999 it has been provided that if a person providing service is non-resident and does not have address or place of business in India, service tax is payable by person receiving taxable service in India [Rule 2(1)(d)(iv)]. The amendment has come in effect from 11 May 1999. In such a case, person receiving the service will also have to register.
8.2
If a person pays service tax, which he was not liable to pay in the first place, he is entitled for a refund provided refund claim has been filed within the prescribed time[1].
[1] CCE vs Ambuja Cement Eastern Ltd;
7. Services must be to a client - two parties
In relation to consulting engineer, the word used is client. In the case of Rolls Royce Industries Power (I) Ltd. v. CCE, the appellant entered into an operation and maintenance agreement with the owner of a power station. The terms of the contract vested complete freedom and responsibility on the appellant, without any interference by the owner. The owner’s right was restricted to entry and access, to be satisfied that the operation was carried out according to standards. He also received reports about the relevant aspects of operation, status and output. The payment for operation and maintenance was determined under the various clauses of the contract. In addition to the lump sum payment, it also provided for bonus and penalty. The terms of the contract did not envisage or involve providing any consulting or engineering help to the owner. The operator was fully autonomous and responsible for the performance of operation and maintenance. Whatever engineering issues were involved, it was for the operator to find solutions for, and attend to in the course of operation and maintenance. He was not required to render any advice or to take any orders from the owner. He could not pass on the responsibility for operating the plant in any manner to the owner. So on the basis of these facts, the Tribunal held that there were no two parties, one giving advice and the other accepting it. Service tax is attracted only in a case involving rendering of service. That situation did not take place in the instant case. So in case of pure contract of works/hire etc., service tax is not payable.
7. Services must be to a client - two parties
In relation to consulting engineer, the word used is client. In the case of Rolls Royce Industries Power (I) Ltd. v. CCE, the appellant entered into an operation and maintenance agreement with the owner of a power station. The terms of the contract vested complete freedom and responsibility on the appellant, without any interference by the owner. The owner’s right was restricted to entry and access, to be satisfied that the operation was carried out according to standards. He also received reports about the relevant aspects of operation, status and output. The payment for operation and maintenance was determined under the various clauses of the contract. In addition to the lump sum payment, it also provided for bonus and penalty. The terms of the contract did not envisage or involve providing any consulting or engineering help to the owner. The operator was fully autonomous and responsible for the performance of operation and maintenance. Whatever engineering issues were involved, it was for the operator to find solutions for, and attend to in the course of operation and maintenance. He was not required to render any advice or to take any orders from the owner. He could not pass on the responsibility for operating the plant in any manner to the owner. So on the basis of these facts, the Tribunal held that there were no two parties, one giving advice and the other accepting it. Service tax is attracted only in a case involving rendering of service. That situation did not take place in the instant case. So in case of pure contract of works/hire etc., service tax is not payable.
6. Services may be provided either directly or indirectly
6.1
The word ‘indirectly’ is indicative of the fact that even indirect advice, consultancy or technical assistance in one or more disciplines of engineering is covered. There may be cases where a consulting engineer does not provide engineering services to a client directly but in the capacity of a sub-consultant, etc., to another consulting engineer who is prime consultant. In this regard, the Government vide Circular F.No. B. 43/5/97 TRU, dated 2-7-1997 has clarified that the services should be rendered to a client directly, and not in the capacity of a sub-consultant/associate consultant to another consulting engineer, who is the prime consultant. When services are rendered to the prime consultant, the levy of service tax does not fall on the sub-consultant but is on the prime or main consulting engineer who raises a bill on his client (which would include the charge for services rendered by the sub-consultant).
6.2
A service rendered indirectly will be liable to tax, if the prime contractor fails to discharge his service tax liability or is not exigible to service tax. In a work contract, the contractor, a consulting firm, may seek opinions from other consulting engineers. As the work contracts are not exigible to tax under consulting engineer service, the consulting engineer providing opinion will be liable to pay service tax.
6.3
In the case of L&T-Sargent & Lundy Ltd. v. CCE [Mumbai Bench], the appellant provided engineering services to M/s. Larsen & Toubro Limited and paid the service tax and also included the same in the bills raised on M/s. Larsen & Toubro Limited. They later realised that M/s. Larsen & Toubro Limited being consulting engineers themselves were liable to pay the service tax on the services rendered by them to the customers. On that ground, they filed a refund claim of the tax already paid. The Dy. Commissioner accepted the contention and directed refund to be paid. This order was reviewed by the jurisdictional Commissioner in terms of section 84 of the Finance Act, 1994. But the Tribunal allowed the same.
6.4
In the case of Nokia India P Ltd. Vs CCE (2006) 1 STR 233(Del), the tribunal has revealed a different dimension of the term ‘directly or indirectly’ by deciding that the expression consultant engineer encompasses direct or indirect rendering of such service including technical assistance and this includes the training of personnel, software support, operation and maintenance services, emergency support services, technical consultancy etc.
The word ‘indirectly’ is indicative of the fact that even indirect advice, consultancy or technical assistance in one or more disciplines of engineering is covered. There may be cases where a consulting engineer does not provide engineering services to a client directly but in the capacity of a sub-consultant, etc., to another consulting engineer who is prime consultant. In this regard, the Government vide Circular F.No. B. 43/5/97 TRU, dated 2-7-1997 has clarified that the services should be rendered to a client directly, and not in the capacity of a sub-consultant/associate consultant to another consulting engineer, who is the prime consultant. When services are rendered to the prime consultant, the levy of service tax does not fall on the sub-consultant but is on the prime or main consulting engineer who raises a bill on his client (which would include the charge for services rendered by the sub-consultant).
6.2
A service rendered indirectly will be liable to tax, if the prime contractor fails to discharge his service tax liability or is not exigible to service tax. In a work contract, the contractor, a consulting firm, may seek opinions from other consulting engineers. As the work contracts are not exigible to tax under consulting engineer service, the consulting engineer providing opinion will be liable to pay service tax.
6.3
In the case of L&T-Sargent & Lundy Ltd. v. CCE [Mumbai Bench], the appellant provided engineering services to M/s. Larsen & Toubro Limited and paid the service tax and also included the same in the bills raised on M/s. Larsen & Toubro Limited. They later realised that M/s. Larsen & Toubro Limited being consulting engineers themselves were liable to pay the service tax on the services rendered by them to the customers. On that ground, they filed a refund claim of the tax already paid. The Dy. Commissioner accepted the contention and directed refund to be paid. This order was reviewed by the jurisdictional Commissioner in terms of section 84 of the Finance Act, 1994. But the Tribunal allowed the same.
6.4
In the case of Nokia India P Ltd. Vs CCE (2006) 1 STR 233(Del), the tribunal has revealed a different dimension of the term ‘directly or indirectly’ by deciding that the expression consultant engineer encompasses direct or indirect rendering of such service including technical assistance and this includes the training of personnel, software support, operation and maintenance services, emergency support services, technical consultancy etc.
6. Services may be provided either directly or indirectly
6.1
The word ‘indirectly’ is indicative of the fact that even indirect advice, consultancy or technical assistance in one or more disciplines of engineering is covered. There may be cases where a consulting engineer does not provide engineering services to a client directly but in the capacity of a sub-consultant, etc., to another consulting engineer who is prime consultant. In this regard, the Government vide Circular F.No. B. 43/5/97 TRU, dated 2-7-1997 has clarified that the services should be rendered to a client directly, and not in the capacity of a sub-consultant/associate consultant to another consulting engineer, who is the prime consultant. When services are rendered to the prime consultant, the levy of service tax does not fall on the sub-consultant but is on the prime or main consulting engineer who raises a bill on his client (which would include the charge for services rendered by the sub-consultant).
6.2
A service rendered indirectly will be liable to tax, if the prime contractor fails to discharge his service tax liability or is not exigible to service tax. In a work contract, the contractor, a consulting firm, may seek opinions from other consulting engineers. As the work contracts are not exigible to tax under consulting engineer service, the consulting engineer providing opinion will be liable to pay service tax.
6.3
In the case of L&T-Sargent & Lundy Ltd. v. CCE [Mumbai Bench], the appellant provided engineering services to M/s. Larsen & Toubro Limited and paid the service tax and also included the same in the bills raised on M/s. Larsen & Toubro Limited. They later realised that M/s. Larsen & Toubro Limited being consulting engineers themselves were liable to pay the service tax on the services rendered by them to the customers. On that ground, they filed a refund claim of the tax already paid. The Dy. Commissioner accepted the contention and directed refund to be paid. This order was reviewed by the jurisdictional Commissioner in terms of section 84 of the Finance Act, 1994. But the Tribunal allowed the same.
6.4
In the case of Nokia India P Ltd. Vs CCE (2006) 1 STR 233(Del), the tribunal has revealed a different dimension of the term ‘directly or indirectly’ by deciding that the expression consultant engineer encompasses direct or indirect rendering of such service including technical assistance and this includes the training of personnel, software support, operation and maintenance services, emergency support services, technical consultancy etc.
The word ‘indirectly’ is indicative of the fact that even indirect advice, consultancy or technical assistance in one or more disciplines of engineering is covered. There may be cases where a consulting engineer does not provide engineering services to a client directly but in the capacity of a sub-consultant, etc., to another consulting engineer who is prime consultant. In this regard, the Government vide Circular F.No. B. 43/5/97 TRU, dated 2-7-1997 has clarified that the services should be rendered to a client directly, and not in the capacity of a sub-consultant/associate consultant to another consulting engineer, who is the prime consultant. When services are rendered to the prime consultant, the levy of service tax does not fall on the sub-consultant but is on the prime or main consulting engineer who raises a bill on his client (which would include the charge for services rendered by the sub-consultant).
6.2
A service rendered indirectly will be liable to tax, if the prime contractor fails to discharge his service tax liability or is not exigible to service tax. In a work contract, the contractor, a consulting firm, may seek opinions from other consulting engineers. As the work contracts are not exigible to tax under consulting engineer service, the consulting engineer providing opinion will be liable to pay service tax.
6.3
In the case of L&T-Sargent & Lundy Ltd. v. CCE [Mumbai Bench], the appellant provided engineering services to M/s. Larsen & Toubro Limited and paid the service tax and also included the same in the bills raised on M/s. Larsen & Toubro Limited. They later realised that M/s. Larsen & Toubro Limited being consulting engineers themselves were liable to pay the service tax on the services rendered by them to the customers. On that ground, they filed a refund claim of the tax already paid. The Dy. Commissioner accepted the contention and directed refund to be paid. This order was reviewed by the jurisdictional Commissioner in terms of section 84 of the Finance Act, 1994. But the Tribunal allowed the same.
6.4
In the case of Nokia India P Ltd. Vs CCE (2006) 1 STR 233(Del), the tribunal has revealed a different dimension of the term ‘directly or indirectly’ by deciding that the expression consultant engineer encompasses direct or indirect rendering of such service including technical assistance and this includes the training of personnel, software support, operation and maintenance services, emergency support services, technical consultancy etc.
5 Service should pertain to one or more disciplines of engineering
5.1
Engineering is the application of scientific or mathematical principles to develop economical solutions to technical problems, creating products, facilities, and structures that are useful to people. Engineers use imagination, judgment, and reasoning to apply science, technology, mathematics, and practical experience. The result is the design, production, and operation of useful objects or processes. The broad discipline of engineering encompasses a range of specialized sub-disciplines that focus on the issues associated with developing a specific kind of product, or using a specific type of technology. A comprehensive list of various disciplines of engineering is given at the end of paper.
5.2
A service provided by a consulting engineer should pertain to one or more disciplines of engineering to be exigible to service tax under the consulting engineer service. To burden a consulting engineer with service tax, it should be shown that the so called advice, consultancy or technical assistance pertains to one or more discipline of science. An advice, consultancy or technical assistance pertaining to finance, law or management given by a consulting engineer to a client is not exigible to tax under the consulting engineer service.
5.3
The scope of the services of a consultant may include any one or more of the following categories :—
(i) Feasibility report;
(ii) Pre-design services project report;
(iii) Basic design engineering;
(iv) Detailed design engineering;
(v) Procurement;
(vi) 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.
Though the above list is not exhaustive, it reveals the wide scope and nature of the services which may be rendered by a consulting engineer.
5.4
A service provided by a consulting engineer which does not necessarily involves his expertise in one or more discipline of science is also not covered under the category of consulting engineer service. In order to be taxed under this category, it is required that that particular service can be provided by an engineer alone and no one else. If same service can be provided by a Chartered Accountant or a Cost Accountant or a Lawyer or a Management Consultant, then also it cannot be taxed under the category of Consulting Engineer Service .
Chartered Accountant, Cost Accountant, Actuary, or a person holding diploma in relation to insurance can provide services as surveyors or loss assessor . Therefore, insurance surveyor and loss assessors are not categorized as Consulting Engineer Service but under a different category i.e. ‘Insurance Auxiliary Services’
`Architecture’ and `engineering’ are two separate disciplines of technical education and these are two separate professions. Hence service of architect can not be taxed under Consulting Engineer Service. They are taxed under Architect Service’ or ‘Interior Designer Service’.
Engineering is the application of scientific or mathematical principles to develop economical solutions to technical problems, creating products, facilities, and structures that are useful to people. Engineers use imagination, judgment, and reasoning to apply science, technology, mathematics, and practical experience. The result is the design, production, and operation of useful objects or processes. The broad discipline of engineering encompasses a range of specialized sub-disciplines that focus on the issues associated with developing a specific kind of product, or using a specific type of technology. A comprehensive list of various disciplines of engineering is given at the end of paper.
5.2
A service provided by a consulting engineer should pertain to one or more disciplines of engineering to be exigible to service tax under the consulting engineer service. To burden a consulting engineer with service tax, it should be shown that the so called advice, consultancy or technical assistance pertains to one or more discipline of science. An advice, consultancy or technical assistance pertaining to finance, law or management given by a consulting engineer to a client is not exigible to tax under the consulting engineer service.
5.3
The scope of the services of a consultant may include any one or more of the following categories :—
(i) Feasibility report;
(ii) Pre-design services project report;
(iii) Basic design engineering;
(iv) Detailed design engineering;
(v) Procurement;
(vi) 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.
Though the above list is not exhaustive, it reveals the wide scope and nature of the services which may be rendered by a consulting engineer.
5.4
A service provided by a consulting engineer which does not necessarily involves his expertise in one or more discipline of science is also not covered under the category of consulting engineer service. In order to be taxed under this category, it is required that that particular service can be provided by an engineer alone and no one else. If same service can be provided by a Chartered Accountant or a Cost Accountant or a Lawyer or a Management Consultant, then also it cannot be taxed under the category of Consulting Engineer Service .
Chartered Accountant, Cost Accountant, Actuary, or a person holding diploma in relation to insurance can provide services as surveyors or loss assessor . Therefore, insurance surveyor and loss assessors are not categorized as Consulting Engineer Service but under a different category i.e. ‘Insurance Auxiliary Services’
`Architecture’ and `engineering’ are two separate disciplines of technical education and these are two separate professions. Hence service of architect can not be taxed under Consulting Engineer Service. They are taxed under Architect Service’ or ‘Interior Designer Service’.
5. Service should pertain to one or more disciplines of engineering
5.1
Engineering is the application of scientific or mathematical principles to develop economical solutions to technical problems, creating products, facilities, and structures that are useful to people. Engineers use imagination, judgment, and reasoning to apply science, technology, mathematics, and practical experience. The result is the design, production, and operation of useful objects or processes. The broad discipline of engineering encompasses a range of specialized sub-disciplines that focus on the issues associated with developing a specific kind of product, or using a specific type of technology. A comprehensive list of various disciplines of engineering is given at the end of paper.
5.2
A service provided by a consulting engineer should pertain to one or more disciplines of engineering to be exigible to service tax under the consulting engineer service. To burden a consulting engineer with service tax, it should be shown that the so called advice, consultancy or technical assistance pertains to one or more discipline of science. An advice, consultancy or technical assistance pertaining to finance, law or management given by a consulting engineer to a client is not exigible to tax under the consulting engineer service.
5.3
The scope of the services of a consultant may include any one or more of the following categories :—
(i) Feasibility report;
(ii) Pre-design services project report;
(iii) Basic design engineering;
(iv) Detailed design engineering;
(v) Procurement;
(vi) 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.
Though the above list is not exhaustive, it reveals the wide scope and nature of the services which may be rendered by a consulting engineer.
5.4
A service provided by a consulting engineer which does not necessarily involves his expertise in one or more discipline of science is also not covered under the category of consulting engineer service. In order to be taxed under this category, it is required that that particular service can be provided by an engineer alone and no one else. If same service can be provided by a Chartered Accountant or a Cost Accountant or a Lawyer or a Management Consultant, then also it cannot be taxed under the category of Consulting Engineer Service .
Chartered Accountant, Cost Accountant, Actuary, or a person holding diploma in relation to insurance can provide services as surveyors or loss assessor . Therefore, insurance surveyor and loss assessors are not categorized as Consulting Engineer Service but under a different category i.e. ‘Insurance Auxiliary Services’
`Architecture’ and `engineering’ are two separate disciplines of technical education and these are two separate professions. Hence service of architect can not be taxed under Consulting Engineer Service. They are taxed under Architect Service’ or ‘Interior Designer Service’.
Engineering is the application of scientific or mathematical principles to develop economical solutions to technical problems, creating products, facilities, and structures that are useful to people. Engineers use imagination, judgment, and reasoning to apply science, technology, mathematics, and practical experience. The result is the design, production, and operation of useful objects or processes. The broad discipline of engineering encompasses a range of specialized sub-disciplines that focus on the issues associated with developing a specific kind of product, or using a specific type of technology. A comprehensive list of various disciplines of engineering is given at the end of paper.
5.2
A service provided by a consulting engineer should pertain to one or more disciplines of engineering to be exigible to service tax under the consulting engineer service. To burden a consulting engineer with service tax, it should be shown that the so called advice, consultancy or technical assistance pertains to one or more discipline of science. An advice, consultancy or technical assistance pertaining to finance, law or management given by a consulting engineer to a client is not exigible to tax under the consulting engineer service.
5.3
The scope of the services of a consultant may include any one or more of the following categories :—
(i) Feasibility report;
(ii) Pre-design services project report;
(iii) Basic design engineering;
(iv) Detailed design engineering;
(v) Procurement;
(vi) 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.
Though the above list is not exhaustive, it reveals the wide scope and nature of the services which may be rendered by a consulting engineer.
5.4
A service provided by a consulting engineer which does not necessarily involves his expertise in one or more discipline of science is also not covered under the category of consulting engineer service. In order to be taxed under this category, it is required that that particular service can be provided by an engineer alone and no one else. If same service can be provided by a Chartered Accountant or a Cost Accountant or a Lawyer or a Management Consultant, then also it cannot be taxed under the category of Consulting Engineer Service .
Chartered Accountant, Cost Accountant, Actuary, or a person holding diploma in relation to insurance can provide services as surveyors or loss assessor . Therefore, insurance surveyor and loss assessors are not categorized as Consulting Engineer Service but under a different category i.e. ‘Insurance Auxiliary Services’
`Architecture’ and `engineering’ are two separate disciplines of technical education and these are two separate professions. Hence service of architect can not be taxed under Consulting Engineer Service. They are taxed under Architect Service’ or ‘Interior Designer Service’.
Subscribe to:
Posts (Atom)
