PAGE
I-17
PAGE
About the authors I-5
Acknowledgement I-7
A few words from the authors I-9
Chapter-heads I-13
PART A
BASIC CONCEPTS
1
OVERVIEW OF THE NEW SCHEMEOF TAXATION
1.1 Introduction 3
1.2 Negative list - The concept 4
1.3 Overview of the new legislative scheme 5
1.3-1 New provisions under Chapter V of the Act 5
1.3-2 Introduction of Place of Provision of Services Rules, 2012 6
1.3-3 Amendments in the previously applicable rules 6
1.3-4 Exemption notifications 6
1.3-5 Rebate/refund notifications 7
1.3-6 Discontinuation of the earlier statutory provisions and rules 8
1.3-7 Withdrawal of earlier notifications and circulars 8
Annex 1.1 : Service tax proposals in Finance Minister�s Budget Speechfor financial year 2012-13 9
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PAGE
CONTENTS I-18
2
SERVICE - DEFINITION, INCLUSIONSAND EXCLUSIONS
2.1 Introduction 11
2.2 The statutory provision 11
2.3 Framework of section 65B(44) 12
2.4 Activity 12
2.5 Consideration 13
2.5-1 Consideration need not flow from the service receiver 13
2.5-2 Consideration may be monetary or non-monetary 13
2.5-3 Concept of consideration under the EU VAT laws 16
2.5-4 Some key international decisions on the concept ofconsideration 16
2.6 The activity must be carried out by one person for another 25
2.6-1 Meaning of person 25
2.6-2 Exceptions to the general rule �the activity must becarried out by one person for another� 25
2.7 Services include declared services 26
2.8 Specific exclusions 26
2.8-1 Transfer of title in goods or in immovable property 27
2.8-2 Deemed sales 30
2.8-3 Transactions only in money 30
2.8-4 Actionable claims 31
2.8-5 Services of employees 32
2.8-6 Fee taken in a court or a tribunal 33
2.8-7 Sovereign government functions 33
2.9 Some problems on section 65B(44) 35
Annex 2.1 : Whether �donation� is �consideration� for a charitablefoundation imparting free training to the poor 37
Annex 2.2 : Whether market/licence fee is consideration for Servicesprovided by the Agricultural Produce MarketingCommittee (APMC)/Board 38
Annex 2.3 : Draft Circular on leviability of service tax on staff benefitsand employment related transactions 39
PAGE
I-19 CONTENTS
3
DECLARED SERVICES
3.1 Introduction 41
3.2 The statutory provisions 41
3.3 Framework of section 65B(22) 41
3.4 Declared service - The concept 41
3.5 Activities covered under the list of declared services [Section 66E] 42
3.5-1 Renting of immovable property 42
3.5-2 Construction activities 42
3.5-3 Intellectual property services 43
3.5-4 Information technology software services 43
3.5-5 Passive actions 43
3.5-6 Hiring of goods services 43
3.5-7 Hire purchase or sale by installment services 43
3.5-8 Works contract services 43
3.5-9 Catering and restaurant services 44
4
TAXABLE TERRITORY
4.1 Introduction 45
4.2 Definitions of taxable territory and non-taxable territory 45
4.3 Chapter V of the Act applies to the whole of India except Jammuand Kashmir 45
4.4 Definition of India 45
4.5 Territory of the Union of India 46
4.6 Territorial waters of India 46
4.7 Continental shelf of India 46
4.8 Exclusive economic zone of India 47
4.9 Installation, structures and vessel 47
4.10 Applicability of Chapter V of Finance Act under the erstwhilepositive list regime 47
4.11 Problems on taxable territory 48
5
REVERSE CHARGE (TAX SHIFT)
5.1 Introduction 52
PAGE
CONTENTS I-20
5.2 Specific services liable to tax under reverse charge mechanism 52
5.3 Extent of reverse charge liability 53
5.4 Point of reverse charge taxation 55
5.5 Refund of Cenvat Credit to service providers providing servicestaxed on reverse charge basis 56
5.6 Small scale exemption not applicable on services liable to reversecharge 56
5.7 Reverse charge applicable even where service recipient rendersnon-taxable or exempt services 56
5.8 Import of services by government, individuals and charitableinstitutions not liable to reverse charge 57
5.9 Registration requirement for recipient of services liable to reversecharge 57
5.10 Invoicing of services liable to reverse charge 57
5.11 CENVAT credit cannot be utilized for discharge of reverse chargeliability 58
5.12 CENVAT credit of service tax paid under reverse chargemechanism 58
5.13 Problems on reverse charge mechanism 58
5.14 Case studies on reverse charge mechanism 62
6
METHODS FOR VALUATION OF SERVICES
6.1 Introduction 66
6.2 The statutory provisions 66
6.2-1 Framework of sections 67 and 67A 67
6.2-2 Valuation of taxable service where consideration is inmoney [Section 67(1)(i)] 68
6.2-3 Valuation of taxable service where consideration is notwholly or partly in money [Section 67(1)(ii)] 69
6.2-4 Valuation of taxable service where consideration notascertainable [Section 67(1)(iii)] 69
6.2-5 Valuation of taxable service where gross amount chargedis cum-service tax [Section 67(2)] 69
6.2-6 Time of receipt (or payment) of consideration is irrelevantfor valuation purposes [Section 67(3)] 69
6.2-7 Powers of Central Government to frame rules[Section 67(4)] 70
6.3 The scheme of the Service Tax (Determination of Value)Rules, 2006 70
PAGE
I-21 CONTENTS
6.4 Determination of value of services involved in execution of workscontract [Rule 2A] 70
6.4-1 The statutory provision 70
6.4-2 Framework of Rule 2A 72
6.4-3 Actual deduction method [Rule 2A(i)] 72
6.4-4 Abatement/deemed deduction method [Rule 2A(ii)] 74
6.4-5 Bar on availing CENVAT Credit on goods 75
6.5 Determination of value of services in relation to money changing[Rule 2B] 75
6.5-1 The statutory provisions 75
6.5-2 Framework of the relevant rules 76
6.5-3 Currency exchanged from/to INR 77
6.5-4 Where neither of the currencies exchanged is INR 78
6.5-5 Composition scheme for money changing services 78
6.6 Determination of value of taxable involved in supply of food anddrinks in a restaurant or as outdoor catering [Rule 2C] 79
6.6-1 The statutory provision 79
6.6-2 Framework of Rule 2C 80
6.6-3 Restaurant services 80
6.6-4 Outdoor catering services 80
6.6-5 Meaning of total amount 80
6.6-6 Bar on availing CENVAT Credit on goods meant forhuman consumption 81
6.7 Determination of value of a taxable service where considerationfor such service is unascertainable [Rule 3] 81
6.7-1 The statutory provision 82
6.7-2 Framework of Rule 3 82
6.7-3 Determination of value of taxable service is the serviceprovider�s prerogative 82
6.7-4 Where value of similar services is available [Rule 3(a)] 83
6.7-5 Where value of similar services is not available [Rule 3(b)] 84
6.8 Power of Central Excise Officer to reject value [Rule 4] 85
6.9 Deductibility of expenses [Rule 5] 85
6.9-1 The statutory provision 86
6.9-2 Framework of Rule 5 87
6.9-3 The general rule [Rule 5(1)] 87
6.9-4 Exclusion of expenses incurred as pure agent [Rule 5(2)] 89
6.9-5 Meaning of pure agent 89
6.9-6 Conditions for exclusion of expenses 89
PAGE
CONTENTS I-22
6.9-7 Examples of costs and expenses to be excluded fromvalue of a taxable service 90
6.9-8 Deductibility of out of pocket expenses - Position prior to18-4-2006 90
6.9-9 Deductibility of out of pocket expenses - Internationalexperience 94
6.10 Service specific inclusions/exclusions [Rule 6] 94
6.10-1 The statutory provision 95
6.10-2 Framework of Rule 6 96
6.10-3 Specific inclusions [Rule 6(1)] 96
6.10-4 Specific exclusions [Rule 6(2)] 99
6.11 Compounding schemes for determination of value under theService Tax Rules, 1994 100
6.12 Problems on valuation of services 102
Annex 6.1 : Departmental Clarifications on valuation rules 108
Annex 6.2 : Departmental clarifications on valuation of services 110
Annex 6.3 : Clarifications regarding service tax on Authorised servicestation for service, repair, reconditioning or restoration ofmotor cars and two-wheeled motor vehicles 113
Annex 6.4 : Departmental clarifications on valuation rules 114
7
SERVICES UNDER THE NEGATIVE LIST
7.1 Introduction 115
7.2 The statutory provisions 115
7.3 Negative list - The concept 115
7.4 List of activities covered under the negative list [Section 66D] 116
7.4-1 Services by Government or a local authority 116
7.4-2 Services by the Reserve Bank of India 116
7.4-3 Services by a foreign diplomatic mission located in India 117
7.4-4 Agricultural services 117
7.4-5 Trading of goods 117
7.4-6 Process amounting to manufacture or production of goods 118
7.4-7 Selling of space or time slots for advertisements 118
7.4-8 Services by way of access to a road or a bridge on paymentof toll charges 118
7.4-9 Betting, gambling or lottery 118
7.4-10 Admission to entertainment events or access toamusement facilities 118
PAGE
I-23 CONTENTS
7.4-11 Transmission or distribution of electricity 119
7.4-12 Education services 119
7.4-13 Services by way of renting of residential dwelling for useas residence 119
7.4-14 Specified financial transactions 119
7.4-15 Transportation of passengers 119
7.4-16 Transportation of goods 120
7.4-17 Cremation services 120
7.5 Problems on the negative list [Section 66D] 120
8
GENERAL EXEMPTIONS
8.1 Introduction 125
8.2 Small scale exemption 125
8.2-1 Meaning of aggregate value 125
8.2-2 CENVAT credit restrictions on service providers claimingsmall scale exemption 126
8.2-3 Persons not eligible to claim small scale exemption 127
8.2-4 Small scale exemption is optional 127
8.3 Exemption on services to SEZ 128
8.4 Exemption to the extent of R&D cess paid 128
8.5 Exemption on services to foreign diplomatic missions 128
8.6 Exemption on services by TBI and STEP 128
8.7 Exemption from education cess and secondary and highereducation cess 129
8.8 Exemption under Focus Market Scheme 129
8.9 Exemption under Focus Product Scheme 131
8.10 Exemption under Vishesh Krishi and Gram Udyog Yojana 131A
8.11 Problems on general exemptions 131C
Annex 8.1 : Exemption from Education Cess and Secondary andHigher Education Cess 132
9
SPECIFIC EXEMPTIONS
9.1 Introduction 133
9.2 Categorization of exemptions under Mega Exemption Notification 133
PAGE
CONTENTS I-24
9.3 Exemptions on services in the public interest 133
9.3-1 Medical and health care services 134
9.3-2 Services in relation to charitable activities 135
9.3-3 Services in relation to religious activities 136
9.3-4 Legal services 137
9.3-5 Services ancillary to education services 138
9.3-6 General insurance services under specified schemes 138
9.3-7 Employee State Insurance Corporation�s Services 139
9.3-8 Specified services rendered to Government or localauthority or governmental authority 139
9.3-9 Public facilities 140
9.4 Exemptions on services related to arts, culture or sports 140
9.5 Exemptions on construction services 142
9.5-1 Specified services provided to the Government or localauthority or Governmental authority 142
9.5-2 Construction, maintenance, repairs etc. of specifiedpublic infrastructure/utilities 142
9.5-3 Erection or construction of specified original works 143
9.5-4 Exemption to sub-contractors 144
9.6 Exemptions on hospitality services 144
9.6-1 Renting of hotel, inn, guest house etc. 144
9.6-2 Restaurant services 144
9.7 Exemptions on transport related services 145
9.7-1 Inland transport of specified goods by rail or vessel 145
9.7-2 Specified services provided by goods transport agency 145
9.7-3 Specified services of giving means of transport on hire 146
9.7-4 Specified services of transport of passengers 147
9.7-5 Motor vehicle parking services 147
9.8 Exemptions on intermediary services 148
9.9 Exemptions on intermediate production processes 150
9.10 Exemptions on international transactions 151
9.10-1 Business exhibitions held outside India 151
9.10-2 Services by service providers located in a non-taxableterritory 151
9.11 Other exemptions 151
9.11-1 Services provided to the United Nations or a specifiedinternational organization 151
9.11-2 Copyright services 152
9.11-3 Services by an independent journalist/specified newsagencies 154
PAGE
I-25 CONTENTS
9.11-4 Services by an incubatee up to a total business turnoverof INR fifty lakh 154
9.11-5 Services by an unincorporated body or a registered society 154
9.11-6 Slaughtering of animals 157
9.11-7 Transfer of a going concern 157
9.11-8 Services by governmental authority 157
9.12 Problems on exemptions 157
10
SERVICE TAX ABATEMENTS
10.1 Introduction 165
10.2 Categorization of services eligible for abatement under AbatementNotification 165
10.3 Abatement on financial leasing including hire purchase 165
10.3-1 Meaning of amount charged for application of abatement 166
10.4 Abatements on goods transportation services 166
10.4-1 Abatement on transport of goods by rail 166
10.4-2 Abatement on transport of goods by road by goodstransport agency 166
10.4-3 Abatement on transport of goods in a vessel from oneport in India to another 166
10.5 Abatement on passenger transportation services 167
10.5-1 Abatement on transport of passengers by rail 167
10.5-2 Abatement on transport of passengers by air 167
10.6 Abatements on renting activities 167
10.6-1 Abatement on renting of hotel, inns, guest houses etc. 167
10.6-2 Abatement on renting of any motor vehicle designed tocarry passengers 168
10.7 Abatement on catering services 168
10.7-1 Meaning of amount charged for catering services 168
10.8 Abatement to services related to chit 168
10.8-1 Meaning of chit 169
10.9 Abatements on tour operator�s services 169
10.9-1 Meaning of a tour operator 169
10.9-2 Services in relation to a package tour 169
10.9-3 Services solely by way of arranging or bookingaccommodation 169
10.9-4 Other services in relation to a tour 170
PAGE
CONTENTS I-26
10.10 Abatement on Construction activities 170
10.10-1 Position with effect from 1-3-2013 170
10.10-2 Conditions for claiming abatement 171
10.10-3 Meaning of amount charged 171
11
RULES OF INTERPRETATION
11.1 Introduction 172
11.2 The statutory provision 172
11.3 Framework of Section 66F 173
11.4 Reference to a service does not cover reference to a service usedfor providing such service [Section 66F(1)] 173
11.4-1 Exceptions to the rule that reference to a service does notcover reference to service used for providing such service 174
11.5 Specific description prevails over general description[Section 66F(2)] 175
11.6 Taxability of bundled services [Section 66F(3)] 176
11.6-1 Where various elements of service are naturally bundled[Section 66F(3)(i)] 177
11.6-2 Where various elements of service are not naturallybundled [Section 66F(3)(ii)] 178
11.7 Some key ECJ decisions on classification of services 178
12
POINT OF TAXATION RULES
12.1 Introduction 182
12.2 The statutory provisions under the Act 182
12.3 Point of Taxation Rules, 2011 182
12.4 The scheme of the Point of Taxation Rules, 2011 183
12.5 Power of Central Excise Officer to determine point of taxation[Rule 8A] 183
12.6 Applicability, saving and transition provisions [Rules 1 and 9] 183
12.7 Default rule (Rule 3) - Introduction 184
12.8 The relevant basic concepts to understand applicability of rule 3 184
12.9 Statutory time limit for issuance of invoice 185
12.9-1 Meaning of invoice 185
12.10 Date of payment/receipt of payment 185
PAGE
I-27 CONTENTS
12.11 Date of completion of service 186
12.11-1 Date of completion of service in case of continuous supplyof service 186
12.12 Framework of Rule 3 187
12.13 Where the invoice is issued within the statutory time limit 187
12.14 Where the invoice is not issued within the statutory time limit 188
12.15 Point of taxation of advance receipts 188
12.15-1 Exception - Point of taxation of advances upto INR 1000 189
12.16 Rule 3 - In summary 189
12.17 Rule for determining point of taxation in case of change in effectivetax rate (Rule 4) - Introduction 190
12.18 The relevant basic concepts to understand applicability of rule 4 190
12.19 Meaning of change in effective rate of tax 191
12.19-1 History 191
12.20 Framework of Rule 4 191
12.21 Where the taxable service has been provided before the change ineffective rate of tax 191
12.21-1 Invoice issued and payment received after the change ineffective rate of tax 192
12.21-2 Invoice issued prior to but payment received after thechange in effective rate of tax 192
12.21-3 Payment received prior to but invoice issued after thechange in effective rate of tax 192
12.22 Where the taxable service has been provided after the change ineffective rate of tax 193
12.22-1 Invoice issued prior to but payment received after thechange in effective rate of tax 193
12.22-2 Invoice issued and payment received prior to the changein effective rate of tax 193
12.22-3 Payment received prior to but invoice issued after thechange in effective rate of tax 194
12.23 Clarification issued on determination of point of taxation in relationto air travel tickets 194
12.24 Rule 4 - In summary 194
12.25 Point of taxation of a service for the first time (Rule 5) - Introduction 195
12.26 Point of taxation as per rule 5 195
12.27 Rule 5 - Illustrations 196
12.28 Point of reverse charge taxation (Rule 7) - Introduction 196
12.29 The relevant basic concepts to understand applicability of rule 7 196
PAGE
CONTENTS I-28
12.30 Persons liable to pay service tax under reverse charge mechanism 197
12.31 Meaning of associated enterprise 197
12.32 Framework of rule 7 197
12.33 Where the payment is made within a period of six months from thedate of invoice 197
12.34 Where the payment is made beyond the period of six months fromthe date of invoice 198
12.35 Point of taxation of service received from associated enterpriselocated outside India 198
12.36 Point of taxation in case of copyrights etc. (Rule 8) - Introduction 199
12.37 Point of taxation as per Rule 8 199
12.38 Rule 8 - Illustrations 199
Annex 12.1 : Clarifications on changes made with effect from 1-4-2012in point of taxation rules 201
Annex 12.2 : Completion of service 203
Annex 12.3 : Clarification regarding Amendments in Point of TaxationRules, 2011 and other related provisions 204
Annex 12.4 : Clarification on Point of Taxation Rules in relation toairlines 207
Annex 12.5 : Definition of associated enterprise under section 92A ofIncome-tax Act, 1961 208
Annex 12.6 : Clarification on Rate of Tax 210
13
PLACE OF PROVISION OF SERVICES RULES
13.1 Introduction 211
13.2 The statutory provisions 211
13.3 Powers of Central Government 212
13.3-1 Power to frame rules to determine place of provision ofservices 212
13.3-2 Powers to notify description of services or circumstancesfor certain purposes [Rule 13] 212
13.4 Determination of taxability of a service 213
13.5 Scheme of the Place of Provision of Services Rules, 2012 214
13.6 Order of application of the rules [Rule 14] 214
13.7 Overview of the place of supply of services under the EU VAT laws 215
13.7-1 Overview of the place of supply of services under theUK VAT laws 216
PAGE
I-29 CONTENTS
13.7-2 Relevance of EU VAT and UK VAT place of supply ofservices rules for Indian Place of Provision of ServicesRules, 2012 217
13.8 Location of service provider and service recipient - Introduction 217
13.9 Relevance of location of the service provider/service recipient 218
13.10 Location of service provider [Rule 2(h)] 219
13.10-1 Who is a service provider? 219
13.10-2 Location of service provider [Rule 2(h)] 219
13.11 Location of service receiver [Rule 2(i)] 219
13.11-1 Who is a service receiver? 220
13.11-2 Definition of location of service receiver [Rule 2(i)] 220
13.12 Meaning of business establishment 221
13.12-1 Definition of the term business establishment under theEU VAT laws 221
13.12-2 Definition of the term business establishment under theUK VAT laws 221
13.13 Meaning of fixed establishment 222
13.13-1 Definition of the term fixed establishment under theEU VAT laws 223
13.13-2 Definition of the term business establishment under theUK VAT laws 223
13.14 Establishment most directly concerned with provision or use ofservice 224
13.14-1 Establishment most directly concerned with supply forthe purpose of UK place of supply rules 225
13.15 Usual place of residence 225
13.15-1 Definition of the term usual place of residence underEU VAT laws 225
13.15-2 Definition of the term usual place of residence underUK VAT Laws 226
13.16 Case studies on location of service provider/service receiverunder the Indian Place of Provision of Services Rules, 2012 226
13.17 Some key European court decisions on the concept ofestablishment 227
13.18 Rule 3 - Introduction 230
13.19 Framework of rule 3 230
13.20 The default rule - Location of service receiver [Rule 3 - Main Rule] 231
13.21 Exception to the main rule - Location of service provider [Provisoto rule 3] 231
13.22 Illustrative list of services covered under rule 3 232
PAGE
CONTENTS I-30
13.23 Determination of place of provision of services under rule 3 - CaseStudies 232
13.23-1 Main rule - Location of the service receiver 233
13.23-2 Exception to the main rule - Location of the serviceprovider 233
13.24 Rule 3 - Relevant comparative provision(s) under the EU VAT laws 234
13.24-1 The general rule for B2B supply of services - Location ofservice receiver 234
13.24-2 The general rule for B2C supply of services - Location ofservice provider 234
13.25 Rule 3 - Relevant comparative provision(s) under the UK VAT laws 234
13.25-1 The general rule for B2B supply of services 234
13.25-2 The general rule for B2C supply of services 235
13.26 Rule 4 - Introduction 235
13.27 Framework of Rule 4 235
13.27-1 Order of application 235
13.28 Services in respect of goods [Rule 4(a)] 236
13.28-1 Illustrative list of services covered under Rule 4(a) -Main rule 237
13.28-2 Exception - Services provided remotely through electronicmeans [Proviso to Rule 4(a)] 237
13.28-3 Rule 4(a) - Relevant comparative provision(s) under theEU VAT laws 238
13.28-4 Rule 4(a) - Comparative rule under the UK VAT laws 238
13.29 Services requiring service receiver�s or its agent�s presence[Rule 4(b)] 239
13.29-1 Illustrative list of services covered under rule 4(b) 240
13.29-2 Rule 4(b) - Relevant comparative provision(s) under theEU VAT laws 240
13.29-3 Rule 4(b) - Comparative rule under the UK VAT laws 240
13.30 Some key ECJ decisions on performance based rule 241
13.31 Determination of place of provision of performance based servicesunder rule 4 - Case studies 242
13.31-1 General rule [Rule 4(a) & (b)] 242
13.31-2 Exception to the general rule [Proviso to rule 4(a)] 243
13.32 Rule 5 - Introduction 243
13.33 Framework of Rule 5 244
13.33-1 Order of application 244
13.34 Meaning of �immovable property� 244
PAGE
I-31 CONTENTS
13.35 Services directly relating to immovable property 245
13.35-1 Illustrative list of services directly in relation toimmovable property 246
13.36 Service may be in relation to an existing or a future immovableproperty 247
13.37 Services specifically covered under rule 5 247
13.38 Determination of place of provision of services under rule 5 -Case study 247
13.39 Rule 5 - Relevant comparative provision(s) under the EU VAT laws 248
13.40 Rule 5 - Relevant comparative provision(s) under the UK VAT laws 248
13.40-1 Meaning of �land� 248
13.40-2 Services directly related to land or property 249
13.40-3 Land related services 249
13.41 Some key ECJ decisions on immovable property related services 250
13.42 Rule 6 - Introduction 252
13.43 Framework of Rule 6 252
13.43-1 Order of application 252
13.44 Services by way of admission to an event or ancillary to admissionor by way of organization of an event 253
13.44-1 Services by way of admission to an event 253
13.44-2 Services ancillary to admission to an event 253
13.44-3 Services by way of organization of an event 254
13.45 Determination of place of provision of services under rule 6 -Case Study 254
13.46 Rule 6 - Relevant comparative provision(s) under the EU VAT laws 255
13.47 Rule 6 - Relevant comparative provision(s) under the UK VAT laws 255
13.47-1 Anciliary services 256
13.48 Some key European court decisions on the concept of events/services relating to events 256
13.49 Rule 7 - Introduction 258
13.50 Framework of rule 7 258
13.51 Service provided at multiple locations, including a location in thetaxable territory 258
13.52 Place of provision of service - Location in the taxable territorywhere greatest proportion of the service is provided 259
13.53 Rule 7 - Relevant comparative provision(s) under the UK VAT laws 259
13.54 Rule 8 - Introduction 260
13.55 Framework of rule 8 260
13.56 Service provider and service recipient located in taxable territory 261
PAGE
CONTENTS I-32
13.57 Place of provision of service (rule 8) - Location of service recipient 261
13.58 Determination of place of provision of services under rule 8 -Case Study 261
13.59 Rule 9 - Introduction 262
13.60 Framework of rule 9 262
13.61 Services provided by banking company, or financial institution, ornon-banking financial company, to account holders 263
13.61-1 Meaning of a banking company, financial institution andnon-banking financial company 263
13.61-2 Meaning of the account holder 264
13.61-3 Rule 9(a) - Relevant comparative provision(s) under theEU VAT laws 265
13.61-4 Rule 9(a) - Relevant comparative provision(s) under theUK VAT laws 265
13.62 Online information and database access or retrieval services 266
13.62-1 Meaning of data 267
13.62-2 Meaning of information 267
13.62-3 Meaning of electronic form 267
13.62-4 Meaning of computer network 268
13.62-5 Scope of online information and database access orretrieval services 268
13.62-6 Rule 9(b) - Relevant comparative provision(s) under theEU VAT laws 269
13.62-7 Rule 9(b) - Relevant comparative provision(s) under theUK VAT laws 269
13.63 Intermediary services 271
13.63-1 Meaning of intermediary 271
13.63-2 Rule 9(c) - Relevant comparative provision(s) under theEU VAT laws 272
13.63-3 Rule 9(c) - Relevant comparative provision(s) under theUK VAT laws 272
13.64 Service consisting of hiring of means of transport upto a periodof one month 273
13.64-1 Meaning of hiring 273
13.64-2 Meaning of means of transport 274
13.64-3 Upto a period of one month 274
13.64-4 Rule 9(d) - Relevant comparative provision(s) under theEU VAT laws 275
13.64-5 Rule 9(d) - Relevant comparative provision(s) under theUK VAT laws 276
PAGE
I-33 CONTENTS
13.65 Place of provision of specified services (rule 9) - Location of serviceprovider 277
13.66 Determination of place of provision of services under rule 9 -Case Study 277
13.67 Rule 10 - Introduction 278
13.68 Framework of rule 10 278
13.69 Meaning of goods 278
13.70 Means of transport 278
13.70-1 Exception - Transportation of goods by mail or courier 278
13.71 Place of provision of service - Destination of goods 279
13.71-1 Determination of place of provision of services relatingto transport of goods under rule 10 - Case Study 279
13.72 Exception - Transportation of goods by goods transport agency 279
13.72-1 Meaning of goods transport agency 280
13.72-2 Person liable to pay service tax 280
13.72-3 Place of provision of service - Location of person liableto pay tax 280
13.72-4 Determination of place of provision of services of goodstransport agency under rule 10 (proviso) - Case Study 281
13.73 Rule 10 - Relevant comparative provision(s) under the EU VATlaws 281
13.73-1 B2B supply of goods transport services 281
13.73-2 B2C supply of goods transport services 281
13.73-3 Meaning of intra-community transport of goods 282
13.73-4 Meaning of place of departure 282
13.74 Rule 10 - Relevant comparative provision(s) under the UK VAT laws 282
13.74-1 Meaning of freight transport 282
13.74-2 Meaning of freight 282
13.74-3 Determination of place of supply of services relating totransport of goods 282
13.75 Rule 11 - Introduction 283
13.76 Framework of rule 11 283
13.77 Transportation of passengers 283
13.78 Means of transport 284
13.79 Place of provision of service - Place where the passenger embarkson the conveyance for a continuous journey 284
13.80 Determination of place of provision of passenger transport servicesunder rule 11 - Case Studies 285
13.80-1 Continuous journey 285
13.80-2 Non-continuous journey 285
PAGE
CONTENTS I-34
13.81 Rule 11- Relevant comparative provision(s) under the EU VAT laws 286
13.82 Rule 11- Relevant comparative provision(s) under the UK VAT laws 286
13.82-1 Meaning of passenger transport 286
13.82-2 Exclusions 286
13.82-3 Inclusions �incidental services� 286
13.82-4 Place of supply of passenger transport service 287
13.83 Rule 12 - Introduction 287
13.84 Framework of rule 12 287
13.85 Services provided on board a conveyance 287
13.85-1 Services provided on board a conveyance must beseparately charged 288
13.86 Place of provision of service - First scheduled point of departure ofthe conveyance for the journey 288
13.87 Determination of place of provision of services provided on-boarda conveyance - Case Study 288
13.88 Rule 12 - Relevant comparative provision(s) under the EU VAT laws 289
13.89 Rule 12 - Relevant comparative provision(s) under the UK VAT laws 289
Annex 13.1 : Location of service provider/service receiver-Flow diagram 290
Annex 13.2 : Meaning of fixed extablishment 291
Annex 13.3 : Indicative list of the electronically supplied servicesreferred to in Article 58 and point (k) of the firstparagraph of Article 59 292
Annex 13.4 : Illustrations on passenger transport services 294
PART B
OLD LAW v. NEW LAW
14
POSITIVE LIST vs. NEGATIVE LIST -A COMPARATIVE STUDY
14.1 Introduction 299
14.2 Key legislative provisions for export and import of services underold regime vis-a-vis new regime 303
14.2-1 The Finance Act, 1994 [Section 65 �Definition�] 303
14.2-2 Export of Service Rules, 2005 [�Export Rules�] 303
14.2-3 Taxation of Services (Provided from outside India andreceived in India) Rules, 2006 [�Import Rules�] 304
14.2-4 Place of Provision of Services Rules, 2012 [PPS Rules] 305
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14.3 Comparison of old law with new law for taxable services notifiedunder old law 306
14.3-1 Advertising agency�s services 306
14.3-2 Airport services 307
14.3-3 Air travel agent�s services 311
14.3-4 Architect�s services 313
14.3-5 Asset management services 313
14.3-6 Auction services 314
14.3-7 Automated Teller Machine (ATM) operations,maintenance or management services 315
14.3-8 Banking and other financial services 316
14.3-9 Beauty treatment services 319
14.3-10 Broadcasting services 319
14.3-11 Business auxiliary services 320
14.3-12 Business exhibition services 324
14.3-13 Business support services 324
14.3-14 Cable services 326
14.3-15 Cargo handling services 327
14.3-16 Chartered accountant�s services 328
14.3-17 Cleaning services 329
14.3-18 Clearing and forwarding agent�s services 330
14.3-19 Club or association services 331
14.3-20 Commercial or industrial construction services 332
14.3-21 Commercial training or coaching services 334
14.3-22 Commercial use or exploitation of event services 337
14.3-23 Commodity exchange services 337
14.3-24 Company secretary�s services 338
14.3-25 Construction of residential complex services 339
14.3-26 Consulting engineer�s services 340
14.3-27 Convention services 341
14.3-28 Copyright services 342
14.3-29 Cosmetic and plastic surgery services 343
14.3-30 Cost accountant�s services 344
14.3-31 Courier services 345
14.3-32 Credit card, debit card, charge card or other paymentcard services 346
14.3-33 Credit rating agency�s services 347
14.3-34 Custom house agent�s services 347
14.3-35 Design services 348
PAGE
CONTENTS I-36
14.3-36 Development and supply of content service for use incertain services 349
14.3-37 Dredging services 349
14.3-38 Dry cleaning services 350
14.3-39 Electricity exchange�s service 351
14.3-40 Erection, commissioning or installation services 352
14.3-41 Event management services 353
14.3-42 Fashion designing services 354
14.3-43 Foreign exchange broker�s services 355
14.3-44 Forward contract services 356
14.3-45 Franchise services 357
14.3-46 General insurance service 358
14.3-47 Health and fitness centre service 361
14.3-48 Health check-up and treatment services/clinicalestablishment services 362
14.3-49 Hotel/short-term accommodation services 363
14.3-50 Information technology software service 364
14.3-51 Insurance auxiliary services (General insurance) 365
14.3-52 Insurance auxiliary services (Life insurance) 367
14.3-53 Intellectual property services 368
14.3-54 Interior decorator�s services 369
14.3-55 Internet cafe services 370
14.3-56 Internet telecommunication services 371
14.3-57 Legal consultancy services 372
14.3-58 Life insurance services 373
14.3-59 Mailing list compilation and mailing services 374
14.3-60 Management, maintenance or repairs services 375
14.3-61 Management of investment under ULIP services 377
14.3-62 Management or business consultancy services 378
14.3-63 Mandap keeper�s services 378
14.3-64 Manpower recruitment and supply agency�s services 379
14.3-65 Market research agency�s services 380
14.3-66 Medical records maintenance services 381
14.3-67 Mining of mineral, oil or gas service 382
14.3-68 Motor-vehicle repair related services 383
14.3-69 Online information and database access or retrieval services 384
14.3-70 Opinion poll services 385
14.3-71 Other port (minor port) services 385
14.3-72 Outdoor catering services 389
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I-37 CONTENTS
14.3-73 Packaging services 391
14.3-74 Pandal or shamiana contractor�s services 391
14.3-75 Photography services 393
14.3-76 Port (major port) services 393
14.3-77 Processing and clearing house services 397
14.3-78 Programme producer�s services 398
14.3-79 Promotion, marketing or organizing of games of chanceservices 399
14.3-80 Promotion of brand of goods, services, events, businessentity etc. 401
14.3-81 Provision of preferential location or external or internaldevelopment of complex services 402
14.3-82 Public relations management services 403
14.3-83 Rail travel agent�s services 404
14.3-84 Real estate agent�s services 405
14.3-85 Recovery agent�s services 405
14.3-86 Registrar to an issue�s services 406
14.3-87 Rent-a- cab operator�s services 407
14.3-88 Renting of immovable property services 408
14.3-89 Restaurant services 410
14.3-90 Sale of space or time for advertisement services 411
14.3-91 Scientific or technical consultancy services 412
14.3-92 Security/detective agency�s services 413
14.3-93 Share transfer agent�s services 413
14.3-94 Ship management services 414
14.3-95 Site formation and clearance, excavation, earth movingand demolition services 416
14.3-96 Sound recording service 417
14.3-97 Sponsorship services 418
14.3-98 Steamer agent�s services 420
14.3-99 Stock broker�s services 421
14.3-100 Stock exchange services 422
14.3-101 Storage and warehousing services 423
14.3-102 Supply of tangible goods services 425
14.3-103 Survey and exploration of mineral, oil or gas service 426
14.3-104 Survey and map making services 427
14.3-105 Technical inspection and certification services 428
14.3-106 Technical testing and analysis services 429
14.3-107 Telecommunication services 431
PAGE
CONTENTS I-38
14.3-108 Tour operator�s services 433
14.3-109 Transport of costal goods and goods transported throughnational waterways and inland water services 435
14.3-110 Transport of goods by air services 437
14.3-111 Transport of goods by rail services 439
14.3-112 Transport of goods by road services 440
14.3-113 Transport of goods other than water through pipeline orother conduit service 444
14.3-114 Transport of passengers by air services 445
14.3-115 Transport of persons by cruise ship services 447
14.3-116 Travel agent�s services 448
14.3-117 Underwriter�s services 449
14.3-118 Video production agency�s services 450
14.3-119 Works contract services 451
Annex 14.1 : Export of Services Rules, 2005 454
Annex 14.2 : Taxation of Services (Provided from outside India andreceived in India) Rules, 2006 458
PART C
TAXABILITY OF SPECIFIC SERVICES
15
ADVERTISEMENTS SERVICESUNDER NEGATIVE LIST
15.1 Introduction 463
15.2 The statutory provision 463
15.3 Meaning of advertisement 463
15.4 Scope of the activities of selling of space or time slots foradvertisements covered under the negative list 464
15.5 Sale of space or time slots under various forms of advertising andtheir coverage under the negative list 464
15.5-1 Advertising through print media 464
15.5-2 Outdoor advertising 465
15.5-3 Broadcast advertising 465
15.5-4 Infomercials 465
15.5-5 Covert advertising 465
15.5-6 Surrogate advertising 466
15.5-7 Public service advertising 466
15.5-8 Celebrity endorsements 466
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I-39 CONTENTS
16
AGRICULTURAL SERVICES UNDER NEGATIVELIST AND SPECIFIC EXEMPTIONS
16.1 Introduction 467
16.2 The statutory provision 467
16.3 Scope of services relating to agriculture 468
16.4 Agricultural operations directly related to production ofagricultural produce 468
16.4-1 Meaning of relevant terms/expressions 468
16.5 Supply of farm labour 470
16.6 Processes carried out on agricultural farm 471
16.7 Renting of agro machinery or vacant land 471
16.7-1 Renting of agricultural machinery 471
16.7-2 Renting of vacant land with or without a structureincidental to its use 471
16.8 Loading, unloading, storage and warehousing services 471
16.8-1 Meaning of relevant terms/expressions 471
16.9 Agricultural extension services 473
16.9-1 Meaning of agricultural extension services 473
16.10 Services by Agricultural Produce Marketing Committee orCommission agents 473
16.10-1 Meaning of Agricultural Produce Marketing Committee orBoard 473
16.10-2 Services provided by a commission agent 474
16.11 Exemptions on services relating to agriculture or agriculturalproduce 474
16.11-1 Construction activities 474
16.11-2 Inland transport of specified goods by rail or vessel 475
16.11-3 Specified services provided by goods transport agency 475
16.11-4 General insurance services under specified schemes 475
16.11-5 Exemptions on intermediate production processes 476
17
BANKING, FINANCIAL AND INSURANCE SERVICESUNDER NEGATIVE LIST AND SPECIFIC EXEMPTIONS
17.1 Introduction 477
17.2 Meaning of relevant terms 477
PAGE
CONTENTS I-40
17.2-1 Meaning of bank 478
17.2-2 Meaning of interest 479
17.2-3 Meaning of authorized dealer 479
17.3 Coverage under the negative list 480
17.3-1 The statutory provision 480
17.3-2 Activity of extending loans or deposits where theconsideration is in the form of interest or discount 480
17.3-3 Services by way of sale or purchase of foreign currency 481
17.4 Specific exemptions 482
17.4-1 Exemptions under the Mega Exemption Notification 482
17.4-2 Abatement from taxable value on financial leasingtransactions 484
17.5 Place of provision of banking, financial or insurance services 485
17.5-1 Place of provision of services provided by a bankingcompany, or a financial institution, or a non-bankingfinancial company, to account holders 485
17.5-2 Place of provision of other banking financial servicesor insurance services 487
17.6 Valuation of banking, financial or insurance services 488
17.6-1 Specific inclusions [Rule 6(1)] 488
17.6-2 Specific exclusions [Rule 6(2)] 488
18
BETTING, GAMBLING OR LOTTERY SERVICESUNDER NEGATIVE LIST
18.1 Introduction 490
18.2 The statutory provision 490
18.3 Meaning and scope of betting or gambling 490
18.3-1 Legality of betting or gambling activities in India 491
18.4 Meaning of lottery 491
18.4-1 Legality of lottery in India 492
18.5 Ancillary services to betting, gambling or lottery are excluded fromthe negative list 492
18.5-1 Exemption to lottery distributor or selling agent 492
18.5-2 Composition scheme for services of promotion, marketing,organizing of lottery 493
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I-41 CONTENTS
18.6 Some key ECJ decisions on the EU VAT exemption on betting,gambling or lottery 494
18.6-1 Relevant Article(s) of the Sixth EU VAT Directive 494
18.6-2 Fischer v. Finanzamt Donaueschingen (Case C-283/95)[1998] All ER (D) 264 494
18.6-3 United Utilities v. HMRC (C-89/05) [ECJ.89105[2006] STC 1423] 495
18.6-4 Etat Belge v. Pierre Henfling, Raphael Davin and KoenraadTanghe (Case C-464/10) 496
Annex 18.1 : Scope of services relating to promoting, marketingor organizing of games of chance, including lotteryExplained under the erstwhile positive list regime 497
19
CATERING AND RESTAURANT SERVICESAS DECLARED SERVICES
19.1 Introduction 498
19.2 Scope of catering service as a declared service 498
19.3 Meaning of catering 499
19.4 Specified goods 500
19.4-1 Meaning of food 500
19.4-2 Meaning of articles of human consumption 500
19.4-3 Meaning of drink 500
19.5 Place of provision of catering service as a declared service 501
19.6 Point of taxation of catering service as a declared service 501
19.7 Valuation catering service as a declared service 501
19.7-1 The statutory provision 501
19.7-2 Framework of rule 2C 502
19.7-3 Restaurant services 502
19.7-4 Outdoor catering services 502
19.7-5 Meaning of total amount 502
19.7-6 Bar on availing CENVAT Credit on goods meant forhuman consumption 503
19.8 Reverse charge liability 503
19.9 General exemptions 504
19.10 Specific exemptions on catering services 504
19.10-1 Catering services to educational institutions 504
PAGE
CONTENTS I-42
19.10-2 Exemption to specified category of restaurants, eatingjoints and messes 504
19.10-3 30 per cent abatement on catering services rendered atspecified premises 505
20
CHARITABLE AND RELIGIOUS SERVICESEXEMPT FROM TAX
20.1 Introduction 506
20.2 Scope of exemptions 506
20.3 Services in relation to charitable activities 506
20.3-1 Some key ECJ decisions on EU VAT exemption on servicesof organizations devoted to social well being 507
20.4 Services in relation to religious activities 508
21
CONSTRUCTION SERVICES AS DECLARED SERVICESAND SPECIFIC EXEMPTIONS
21.1 Introduction 509
21.2 Constitutional validity 509
21.3 Construction activities - A declared service 510
21.4 Scope of the construction activities covered under the list ofdeclared services 511
21.5 Meaning of construction 511
21.5-1 Meaning of addition 511
21.5-2 Meaning of alteration 512
21.5-3 Meaning of replacement 512
21.5-4 Meaning of remodelling 512
21.6 Complex, building or Civil Structure 512
21.6-1 Meaning of complex 512
21.6-2 Meaning of building 513
21.6-3 Meaning of civil structure 513
21.7 Complex or building intended for sale 513
21.7-1 Authority competent to issue completion certificate 513
21.8 Possible arrangements in terms of which construction activitiesmay be undertaken 514
21.8-1 Tripartite Business Model 514
21.8-2 Redevelopment including slum rehabilitation projects 515
21.8-3 Investment model 515
PAGE
I-43 CONTENTS
21.8-4 Conversion Model 516
21.8-5 Build - Operate - Transfer (BOT) Projects 516
21.8-6 Joint Development Agreement Model 518
21.9 Place of provision of construction activities as a declared service 519
21.10 Point of taxation of construction activities as a declared service 519
21.11 Valuation of construction activities as a declared service 519
21.12 Reverse charge liability 519
21.13 General exemptions 520
21.14 Specific exemptions 520
21.14-1 Specified services provided to the Government, localauthority or Governmental authority 520
21.14-2 Construction, maintenance, repairs etc. of specifiedpublic infrastructure/utilities 520
21.14-3 Erection or construction of specified original works 521
21.14-4 Abatement on construction activities 522
Annex 21.1 : Clarifications on taxability of construction services underdifferent business models 523
Annex 21.2 : Departmental clarifications on taxability of revenuesharing arrangements 527
22
CREMATION AND FUNERAL SERVICESUNDER NEGATIVE LIST
22.1 Introduction 530
22.2 The statutory provision 530
22.3 Scope of cremation services covered under the negative list 530
22.4 Related/similar exemptions 530
22.4-1 Construction, maintenance etc. of electric crematorium 530
22.4-2 Slaughtering of animals 531
22.5 Experience under the UK VAT 531
Annex 22.1 : Clarification on scope of exemption on cremation servicesunder the UK VAT 532
23
EDUCATION SERVICES UNDER NEGATIVELIST AND SPECIFIC EXEMPTIONS
23.1 Introduction 540
PAGE
CONTENTS I-44
23.2 The statutory provision 540
23.3 Pre-school education or education upto higher secondary schoolor equivalent 540
23.3-1 Meaning of pre-school education 540
23.3-2 Meaning of education upto higher secondary school orequivalent 541
23.4 Education as a part of curriculum for obtaining qualificationrecognized by law 541
23.4-1 Scope the term qualification recognized by law 541
23.5 Vocational education course 542
23.5-1 Vocational training institute/industrial training centreaffiliated to NCVT/SCVT 542
23.5-2 Modular Employable Skill Course approved by NCVT 542
23.5-3 Courses run by institutes affiliated to NSDC 543
23.6 Scope of the education services covered under the negative list 543
23.6-1 Services provided by boarding schools 544
23.6-2 Services provided to educational institutions 544
23.6-3 Private tuitions 544
23.6-4 Courses leading to dual qualification only one of whichis recognized by Indian law 544
23.6-5 Placement services provided to educational institutions 545
23.6-6 Entrance tests for admission to colleges 545
23.6-7 Service by educational institutes for campus recruitments 545
23.7 Exemptions under Mega Exemption Notification on servicesancillary to education 545
Annex 23.1 : Departmental clarification on Leviability of Service Taxon Flying Training School & Aircraft MaintenanceEngineering Institutes issued under the erstwhilepositive list regime 547
Annex 23.2 : Departmental clarification on Levy of service tax oneducational institutions issued under the erstwhilepositive list regime 549
Annex 23.3 : Vocational education/training/skill development course(VEC) offered by government institutions or localauthorities covered under negative list 553
Annex 23.4 : List of Trades designated under the Apprentices Act, 1961 554
Annex 23.5 : List of Approved Modular Employable skill (MES) courses 561
PAGE
I-45 CONTENTS
24
ELECTRICITY TRANSMISSION OR DISTRIBUTIONSERVICES UNDER NEGATIVE LIST
24.1 Introduction 571
24.2 The statutory provision 571
24.3 Meaning of electricity 571
24.4 Meaning of transmission of electricity 572
24.5 Meaning of distribution of electricity 572
24.6 Meaning of electricity transmission or distribution utility 572
24.6-1 Central Electricity Authority 572
24.6-2 State Electricity Board 573
24.6-3 Central Transmission Utility 573
24.6-4 State Transmission Utility 573
24.6-5 Transmission licensee 573
24.6-6 Distribution licensee 573
24.7 Scope of the specified services of transmission or distribution ofelectricity 574
24.8 Position under the erstwhile service tax regime 574
Annex 24.1 : Exemption to Transmission of electricity under theerstwhile positive list regime 576
Annex 24.2 : Earlier departmental clarification on Electricity meterinstalled in consumers� premises and hire chargescollected, whether covered under exemption fortransmission and distribution of electricity 577
Annex 24.3 : Exemption from service tax for distribution of electricityunder the erstwhile positive list regime 578
25
ENTERTAINMENT SERVICES UNDERNEGATIVE LIST
25.1 Introduction 579
25.2 The statutory provision 579
25.3 Meaning of entertainment events 579
25.4 Meaning of amusement facilities 580
25.5 Scope of activities by way admission to entertainment events oramusement facilities covered under the negative list 580
25.6 Place of provision of event related services 580
PAGE
CONTENTS I-46
26
FOREIGN DIPLOMATIC MISSIONS� SERVICESUNDER NEGATIVE LIST
26.1 Introduction 582
26.2 The statutory provision 582
26.3 Scope of the services by foreign diplomatic missions located inIndia covered under the negative list 582
26.4 List of foreign diplomatic missions located in India 583
26.5 Exemption on services to foreign diplomatic missions 583
Annex 26.1 : List of the foreign diplomatic missions located in India 584
27
GOODS TRANSPORT SERVICES UNDER NEGATIVELIST AND SPECIFIC EXEMPTIONS
27.1 Introduction 589
27.2 The statutory provision 589
27.3 Scope of goods transport services 589
27.4 Transportation of goods 590
27.4-1 Meaning of transport vehicle 590
27.5 Modes of transportation 590
27.5-1 Goods transport agency 590
27.5-2 Courier agency 591
27.5-3 Transportation of goods by an aircraft or vessel from aplace outside India upto the customs station of clearance 592
27.5-4 Transportation of goods by inland waterways 593
27.5-5 Coverage of goods transport services under the negativelist 594
27.5-6 Services provided by agents for transport of goods byinland waterways 595
27.6 Reverse charge liability on transportation of goods by goodstransport agency 595
27.7 Specific exemptions 595
27.7-1 Inland transport of specified goods by rail or vessel 596
27.7-2 Specified services provided by goods transport agency 596
27.7-3 Specified services of giving means of transport on hire 597
27.7-4 Abatement on transport of goods services 597
27.8 Place of provision of goods transportation services 597
PAGE
I-47 CONTENTS
28
GOVERNMENT SERVICES UNDER NEGATIVELIST AND SPECIFIC EXEMPTIONS
28.1 Introduction 598
28.2 The statutory provision 598
28.3 Scope of the services by Government and local authorities coveredunder the negative list 598
28.4 What is �Government�? 599
28.4-1 Definition of Government under the General ClausesAct, 1897 599
28.5 What is �local authority�? 600
28.6 Exclusions for services by government or local authority fromnegative list 601
28.6-1 Specified services by the department of posts 601
28.6-2 Services in relation to an aircraft or a vessel rendered byGovernment or local authority 602
28.6-3 Transport of goods or passengers by Government orlocal authority 603
28.6-4 Support services provided to business entities byGovernment or local authority 603
28.6-5 Meaning of �to the extent not covered elsewhere� 604
28.7 Exemption on services provided to Government or local authorityor a governmental authority 605
28.8 Exemption on services provided by governmental authority 605
29
HIRE PURCHASE OR SALE BY INSTALMENT RELATEDSERVICES AS DECLARED SERVICES
29.1 Introduction 606
29.2 Constitutional validity 606
29.3 Scope of hire purchase or sale by instalment related services as adeclared service 607
29.4 Delivery of goods 608
29.4-1 Meaning of delivery 608
29.4-2 Meaning of goods 608
29.5 Hire purchase or any system of payment by instalment 609
29.5-1 Meaning of hire purchase 609
PAGE
CONTENTS I-48
29.5-2 Types of hire purchase arrangements 611
29.5-3 Any other system of payment by instalment 613
29.5-4 Comparative analysis of hire purchase, finance lease andsale by instalment 613
29.6 Scope of the taxable transaction 614
29.7 Place of provision in relation to delivery of goods on hire purchaseand sale by instalment related services as a declared service 615
29.8 Point of taxation in relation to hire purchase and sale byinstalment related services as a declared service 615
29.9 Valuation of activities in relation to hire purchase and sale byinstalment related services as a declared service 615
29.10 Reverse charge liability 616
29.11 Relevant services covered under the negative list 616
29.12 General exemptions 616
29.13 Specific exemptions 616
Annex 29.1 : Definition of financial leasing under the erstwhile positivelist regime 617
Annex 29.2 : Clarification on scope of financial leasing services underthe erstwhile positive list regime 618
30
INFORMATION TECHNOLOGY SOFTWARESERVICES AS DECLARED SERVICES
30.1 Introduction 619
30.2 Constitutional validity 619
30.3 Scope of IT software service as a declared service 620
30.4 Meaning of IT software 621
30.4-1 Essential features of �IT software� 621
30.5 Meaning of development of IT software 621
30.6 Meaning of design of IT software 622
30.7 Meaning of programming of IT software 622
30.8 Meaning of customization of IT software 622
30.9 Meaning of adaptation of IT software 622
30.10 Meaning of upgradation of IT software 622
30.11 Meaning of enhancement of IT software 623
30.12 Meaning of implementation of IT software 623
30.13 Taxability of packaged/canned software 623
PAGE
I-49 CONTENTS
30.14 Classification of IT software transactions under the EU VAT laws 623
30.15 Place of provision of IT software service as a declared service 624
30.16 Point of taxation of IT software service as a declared service 624
30.17 Valuation of IT software service as a declared service 624
30.18 Reverse charge liability 624
30.19 General exemptions 625
30.20 Exemption to the extent of R&D cess paid 625
Annex 30.1 : Definition of information technology software service(prior to 1-7-2012) 626
31
INTELLECTUAL PROPERTY RIGHT SERVICESAS DECLARED SERVICES
31.1 Introduction 627
31.2 Scope of intellectual property service as a declared service 627
31.3 Meaning of intellectual property 628
31.3-1 Meaning of copyright 629
31.3-2 Types of copyrights 630
31.3-3 Meaning of patent 631
31.3-4 Meaning of trademark 631
31.3-5 Meaning of design 632
31.3-6 Other intellectual properties 632
31.4 Temporary transfer or permitting the use or enjoyment 632
31.5 Whether or not the intellectual property right is registered underIndian laws is immaterial 633
31.6 Place of provision of intellectual property service as a declaredservice 633
31.7 Point of taxation of intellectual property service as a declaredservice 633
31.8 Valuation of intellectual property service as a declared service 633
31.9 Reverse charge liability 634
31.10 General exemptions 634
31.11 Specific exemptions on intellectual property services 634
31.11-1 Exemption on specified copyright services 634
31.11-2 Exemption to the extent of R&D cess paid 635
PAGE
CONTENTS I-50
32
MANUFACTURE OR JOB WORK ACTIVITIES UNDERNEGATIVE LIST & SPECIFIC EXEMPTIONS
32.1 Introduction 636
32.2 The statutory provision 636
32.3 What is a �process�? 636
32.4 Meaning of manufacture 637
32.4-1 Judicial precedents - Manufacture 637
32.4-2 Incidental or ancillary process 639
32.4-3 Process specified in relation to any goods in Section orChapter Notes 639
32.4-4 Select activities in relation to goods specified underThird Schedule of CETA 639
32.5 Meaning of production 639
32.6 Meaning of process amounting to manufacture or production ofgoods 640
32.6-1 Central or state excise duty must be leviable on theprocess 640
32.6-2 Processes not amounting to manufacture or productionof goods liable to service tax 640
32.6-3 Manufacturing activity carried out by the job worker 641
32.7 Exemptions on intermediate production processes 641
Annex 32.1 : Central Excise Tariff Act, 1985 - Third Schedule 643
Annex 32.2 : Processes liable to central excise - Section 3 of CentralExcise Act, 1944 649
33
MEDICAL AND HEALTH CARE SERVICES -SPECIFIC EXEMPTIONS
33.1 Introduction 651
33.2 Exemptions on medical and health care services 651
33.3 Meaning of health care services 651
33.3-1 Meaning of recognized system of medicine 652
33.3-2 Meaning of clinical establishment 652
33.3-3 Meaning of authorized medical practitioner 652
33.3-4 Meaning of paramedics 652
33.3-5 Some key ECJ decisions on EU VAT exemption onmedical/health care services 653
PAGE
I-51 CONTENTS
34
PASSENGER TRANSPORT SERVICES UNDERNEGATIVE LIST & SPECIFIC EXEMPTIONS
34.1 Introduction 658
34.2 The statutory provision 658
34.3 Scope of passenger transport services 659
34.4 Transportation of passenger 659
34.5 Modes of transportation 659
34.5-1 Stage carriage 660
34.5-2 Railways 660
34.5-3 Metro, monorail or tramway 660
34.5-4 Inland waterways 661
34.5-5 Public transport in vessel 662
34.5-6 Metered cabs, radio taxis or auto rickshaws 663
34.6 Specific exemptions 663
34.6-1 Passenger transportation in specified locations orthrough contract carriage 663
34.6-2 Transportation of passengers by railways 664
34.6-3 Services by way of giving on hire means of transport 664
34.6-4 Motor vehicle parking services 664
34.6-5 Abatement on passenger transport services 665
34.6-6 Erection or construction of specified original works 666
34.7 Place of provision of passenger transportation services 666
34.8 Valuation of passenger transport services 666
34.8-1 Specific inclusions [Rule 6(1)] 667
34.8-2 Specific exclusions [Rule 6(2)] 667
34.9 Composition scheme on services provided by an air travel agent 667
Annex 34.1 : Service tax on transportation of passengers by air -Clarification 668
35
PASSIVE ACTIONS AS DECLARED SERVICES
35.1 Introduction 670
35.2 Scope of passive action as a declared service 670
35.2-1 Non-compete clauses are included 670
35.3 Place of provision of passive action as a declared service 670
PAGE
CONTENTS I-52
35.4 Point of taxation of passive action as a declared service 671
35.5 Valuation of passive action as a declared service 671
35.6 General exemptions 671
35.7 Relevant comparative provision(s) under the EU VAT Laws 671
35.7-1 Rule with respect to place of supply for passive actionsunder the UK VAT law 671
35.7-2 Relevant ECJ case law 671
Annex 35.1 : VATPOSS13100 - Other services to non-EU customers(B2C) : Law 673
36
RBI SERVICES UNDER NEGATIVE LIST
36.1 Introduction 674
36.2 The statutory provision 674
36.3 Scope of the services by Reserve Bank of India covered under thenegative list 674
36.4 What is �Reserve Bank of India� 674
36.5 Principal activities of RBI 675
36.5-1 Formulation and execution of monetary policy 675
36.5-2 Issuer of currency 676
36.5-3 Banker and debt manager to government 676
36.5-4 Banker to banks 676
36.5-5 Regulator of the banking system 677
36.5-6 Manager of foreign exchange 677
36.5-7 Regulator and supervisor of the payment and settlementsystems 677
36.5-8 Developmental role 677
36.5-9 Miscellaneous functions 678
36.6 Businesses which the RBI may/may not transact 678
Annex 36.1 : Business which the RBI may transact 679
Annex 36.2 : Section 19 of the Reserve Bank of India Act, 1934 687
37
RENTING OF GOODS AS DECLARED SERVICE
37.1 Introduction 688
37.2 Scope of hiring, leasing, licensing of goods as a declared service 688
PAGE
I-53 CONTENTS
37.3 Transfer of goods 689
37.3-1 Meaning of transfer 689
37.3-2 Meaning of goods 689
37.4 Mode of transfer of goods 689
37.4-1 Meaning of hiring 690
37.4-2 Meaning of leasing 690
37.4-3 Meaning of licensing 690
37.5 Transfer of goods without transfer of right to use such goods 690
37.6 Judicial precedents - �Transfer of effective control and possession� 692
37.7 Place of provision of hiring, leasing, licensing of goods withouttransfer of right to use goods as a declared service 693
37.8 Point of taxation of hiring, leasing, licensing of goods withouttransfer of right to use goods as a declared service 693
37.9 Valuation of hiring, leasing, licensing of goods without transferof right to use goods as a declared service 694
37.10 Reverse charge liability 694
37.11 Hiring, leasing, licensing of goods covered under the negative list 694
37.12 General exemptions 694
Annex 37.1 : Illustrations on transfer of right to use goods 695
Annex 37.2 : Departmental clarification on supply of tangible goodsservice under the erstwhile positive list regime 696
Annex 37.3 : Service Tax on chartering of aircrafts - Departmentalclarification under the erstwhile positive list regime 697
38
RENTING OF IMMOVABLE PROPERTY SERVICES -AS DECLARED SERVICES; COVERAGE UNDER
NEGATIVE LIST & SPECIFIC EXEMPTIONS
38.1 Introduction 698
38.2 Constitutional validity 698
38.3 Renting of immovable property - As declared service 700
38.4 Scope of renting of immovable property as a declared service 700
38.5 Meaning of renting 701
38.5-1 Whether or not control and possession of immovableproperty is transferred is immaterial 701
38.5-2 Renting includes letting, leasing, licensing or other similararrangements 701
38.5-3 Duration of renting is immaterial 703
PAGE
CONTENTS I-54
38.6 Meaning of immovable property 703
38.6-1 Judicial precedents - �immovable property� 704
38.7 Place of provision of renting of immovable property as a declaredservice 707
38.8 Point of taxation of renting of immovable property as a declaredservice 708
38.9 Valuation of renting of immovable property as a declared service 708
38.10 Reverse charge liability 708
38.11 Specific activities of renting of immovable property coveredunder the negative list 709
38.12 Renting of residential dwelling for use as residence 709
38.12-1 The statutory provision 709
38.12-2 Meaning of residential dwelling 709
38.12-3 Accommodations not qualifying as residential dwelling 710
38.12-4 Renting of residential dwelling must be for use as residence 711
38.12-5 Taxability of bundled services involving renting ofresidential dwelling 711
38.12-6 Coverage of activity renting of residential dwellingunder negative list under various scenarios 712
38.13 Other relevant services covered under the negative list of services 713
38.14 General exemptions 713
38.15 Specific exemptions 713
38.15-1 Renting of immovable property for religious purposes 713
38.15-2 Renting of hotel, inn, guest house etc. with room tariffupto INR 1000 713
38.15-3 Exemption to the extent the gross amount chargedrepresents property tax 714
38.15-4 Abatement on renting of hotel, inns, guest houses etc. 714
Annex 38.1 : Departmental clarification on scope of renting ofimmovable property under the erstwhile positivelist regime 715
39
TOLL ROAD SERVICES UNDER NEGATIVE LIST
39.1 Introduction 716
39.2 The statutory provision 716
39.3 Services related to access to road or bridge on payment on toll 716
39.3-1 Meaning of road 716
PAGE
I-55 CONTENTS
39.3-2 Meaning of bridge 717
39.3-3 Meaning of toll 717
39.4 Difference between tax, toll, cess, fee and duty 717
39.5 Incidental services by toll collecting agencies 718
39.6 Some key ECJ decisions 718
Annex 39.1 : Departmental clarification issued under the erstwhilepositive list regime regarding levy of service tax on tollfee paid by user for using roads 720
40
TRADING OF GOODS UNDERNEGATIVE LIST
40.1 Introduction 721
40.2 The statutory provision 721
40.3 Meaning of trading 721
40.4 Meaning of goods 721
40.4-1 Meaning of securities 722
40.4-2 Meaning of actionable claim 722
40.4-3 Meaning of money 723
40.5 Exclusion towards sale of goods under definition of �service� 723
40.6 Trading does not include commission agent�s service 724
40.7 Commodity trading transactions 724
41
WORKS CONTRACT SERVICES AS DECLAREDSERVICES & SPECIFIC EXEMPTIONS
41.1 Introduction 725
41.2 Scope of works contract service as a declared service 725
41.3 Meaning of works contract 726
41.3-1 Meaning of construction 726
41.3-2 Meaning of erection 726
41.3-3 Meaning of commissioning 726
41.3-4 Meaning of installation 726
41.3-5 Meaning of completion 727
41.3-6 Meaning of fitting out 727
41.3-7 Meaning of repair 727
PAGE
CONTENTS I-56
41.3-8 Meaning of maintenance 727
41.3-9 Meaning of renovation 728
41.3-10 Meaning of alteration 728
41.3-11 Meaning of movable property 728
41.3-12 Meaning of immovable property 729
41.3-13 Goods portion of the works contract must be leviableto tax as sale of goods 729
41.4 Service element in execution of works contract 729
41.4-1 Coverage of works contract 729
41.4-2 Pure labour contracts are excluded 730
41.4-3 Activity done for self is not works contract 730
41.5 Distinction between contract of sale and works contract 730
41.6 Place of provision in relation to works contract service as adeclared service 731
41.7 Point of taxation in relation to works contract service as adeclared service 731
41.8 Valuation of service element under works contract services as adeclared service 731
41.8-1 The statutory provision 732
41.8-2 Framework of Rule 2A 733
41.8-3 Actual deduction method [Rule 2A(i)] 733
41.8-4 Abatement/deemed deduction method [Rule 2A(ii)] 735
41.8-5 Bar on availing CENVAT Credit on goods 736
41.9 Reverse charge liability 736
41.9-1 Reverse charge liability on works contract services 736
41.9-2 Reverse charge liability on services rendered by serviceproviders located outside the taxable territory 736
41.10 General exemptions 737
41.11 Specific exemptions 737
41.11-1 Specified services provided to the Government, localauthority or Governmental authority 737
41.11-2 Construction, maintenance, repairs etc. of specifiedpublic infrastructure/utilities 737
41.11-3 Erection or construction of specified original works 738
41.11-4 Abatement on construction activities 739
41.11-5 Exemption to sub-contractors 739
PAGE
I-57 CONTENTS
PART D
CENVAT CREDIT SCHEME FORSERVICE PROVIDERS
42
SCHEME OF CENVAT CREDIT FORSERVICE PROVIDERS
42.1 Introduction 743
42.2 Historical background 743
42.3 Eligibility of CENVAT credit to service providers [Rule 3] 744
42.3-1 Specific duties and taxes available as CENVAT credit toservice providers 744
42.3-2 Meaning of provider of taxable service 745
42.3-3 Meaning of input 746
42.3-4 Meaning of capital goods 746
42.3-5 Meaning of input service 747
42.3-6 Date and place of receipt inputs/capital goods andquantum of CENVAT credit 749
42.3-7 Utilization of CENVAT credit 749
42.3-8 Removal of inputs or capital goods as such 750
42.3-9 Removal of inputs or capital goods after being used 750
42.3-10 CENVAT credit, if the value is written off in the booksof account 751
42.4 Conditions for claiming CENVAT credit [Rule 4] 751
42.4-1 CENVAT credit on inputs 751
42.4-2 CENVAT credit on capital goods 752
42.4-3 CENVAT credit on input services 753
42.5 Refund of CENVAT credit [Rule 5] 754
42.5-1 Meaning of Export service 756
42.5-2 Safeguards, conditions and limitations for claiming refund 756
42.5-3 Procedure for filing the refund claim 757
42.5-4 Documents to be enclosed with the refund application 758
42.6 Obligation of the provider of output service [Rule 6] 758
42.6-1 Meaning of exempted service 758
42.6-2 No CENVAT credit on inputs, input services and capitalgoods used exclusively for exempt service 759
42.6-3 CENVAT credit eligibility to provider of taxable andexempt services 759
PAGE
CONTENTS I-58
42.6-4 Options where separate accounts in terms of rule 6(2) arenot maintained 759
42.6-5 Conditions common to options available under Rule 6(3) 760
42.6-6 Provisional payment of duty [Rule 6(3A)] 760
42.6-7 CENVAT credit eligibility for banking and other financialservices 764
42.6-8 Meaning of value 764
42.6-9 Rule 6 restrictions not applicable to exported services and servicesprovided to SEZ without payment of service tax 764
42.7 Input credit distribution [Rules 7 & 7A] 764
42.7-1 Input credit distribution - The concept 764
42.7-2 Meaning of input credit distributor 765
42.7-3 Main constituents of the process of input servicedistribution 765
42.7-4 Manner of distribution of credit on input services byinput service distributor 765
42.8 CENVAT credit restrictions for specified category of services 766
42.9 Documents and accounts [Rule 9] 768
42.9-1 Documents necessary for claiming CENVAT credit 768
42.9-2 Credit document must contain prescribed particulars 769
42.9-3 CENVAT credit records to be maintained by serviceprovider 769
42.9-4 Submission of CENVAT credit returns 770
42.10 Transfer of CENVAT credit [Rule10] 770
42.11 Transitional provisions [Rule 11] 771
42.12 Recovery of CENVAT Credit wrongly utilized [Rule 14] 771
42.13 Confiscation and penalty [Rule 15] 772
42.14 Residuary penalty [Rule 15A] 772
42.15 Cenvat credit - Illustrations 772
42.16 Problems on Cenvat credit 772B
42.17 Case studies on Cenvat credit scheme 772G
Annex 42.1 : Rule 3(4) of the Cenvat Credit Rules, 2004 - Cenvat credit -Payment of arrears from Cenvat credit earned at a laterdate 773
Annex 42.2 : Procedure, safeguards, conditions and limitations forclaiming refund under rule 5 of CENVAT CreditRules, 2004 774
PAGE
I-59 CONTENTS
PART E
EXPORTERS’ INCENTIVES
43
INCENTIVES TO EXPORTER OF GOODS
43.1 Introduction 781
43.2 Types of service tax incentives to exporter of goods 781
43.3 Service tax exemption to specified services received by exporterof goods 781
43.3-1 Meaning of goods transport agency 782
43.3-2 Meaning of goods carriage 783
43.3-3 Meaning of container freight station 783
43.3-4 Meaning of inland container depot 783
43.3-5 Distinction between ICD and CFS 783
43.3-6 Meaning of place of removal 784
43.3-7 Conditions/obligations for claiming service tax exemptionon specified services by goods transport agency 784
43.4 Exemption to specified services provided by overseas commissionagents 785
43.4-1 Conditions/obligations for claiming service tax exemptionon specified services by commission agent located outsideIndia 786
43.5 Rebate of service tax to exporter of goods 787
43.5-1 Specified services eligible for rebate 787
43.5-2 Amount of rebate claim 788
43.5-3 Procedure of rebate claim 788
43.5-4 Rebate claim to be denied where export proceeds notrealized within statutory timeline 791
43.6 Refund of CENVAT credit [Rule 5] 791
43.6-1 Safeguards, conditions and limitations for claimingrefund 793
43.6-2 Procedure for filing the refund claim 793
43.6-3 Documents to be enclosed with the refund application 794
PAGE
CONTENTS I-60
44
INCENTIVES TO EXPORTER OF SERVICES
44.1 Introduction 795
44.2 Refund under rule 5 of the CENVAT Credit Rules, 2004 795
44.2-1 Meaning of export service 797
44.2-2 Safeguards, conditions and limitations for claimingrefund 798
44.2-3 Procedure for filing the refund claim 799
44.2-4 Documents to be enclosed with the refund application 799
44.3 Rebate of excise duty and service tax on inputs and input services 800
44.3-1 Key features of rebate scheme for exporter of services 800
44.3-2 Coverage of duties of excise 800
44.3-3 Coverage of service tax and cesses 801
44.3-4 Conditions for services to qualify as exports 801
44.3-5 Key conditions for claiming rebate of duty or service taxand cess 801
44.3-6 Procedure for claiming rebate 802
44.3-7 Rebate claim to be denied on breach of materialconditions 802
45
INCENTIVES TO SEZ DEVELOPERS AND UNITS
45.1 Introduction 803
45.2 Service tax incentives available under Notification 40/2012-ST,dated 20-6-2012 803
45.3 Upfront exemption services received by SEZ unit/Developerof SEZ wholly consumed within the SEZ and used for authorizedoperations 804
45.3-1 Meaning of the term �wholly consumed� 804
45.3-2 Conditions for claiming outright exemption on serviceswholly consumed within SEZ for authorized operations 805
45.4 Exemption by way of refund to SEZ units/developers 806
45.4-1 Conditions for claiming refund by SEZ developers/units 807
45.4-2 Procedure for claiming benefit under NotificationNo. 40/2012-ST dated 20-6-2012 807
45.4-3 Documents to be enclosed along-with refund claimapplication 808
45.4-4 Recovery of refunds erroneously granted 808
PAGE
I-61 CONTENTS
PART F
SERVICE TAX PROCEDURES
46
REGISTRATION UNDER SERVICE TAX
46.1 Introduction 811
46.2 The statutory provision 811
46.3 Persons liable to obtain service tax registration 812
46.3-1 Person liable to pay service tax [Section 69(1)] 812
46.3-2 Registration by such other persons as notified by theCentral Government [Section 69(2)] 815
46.3-3 Registration requirement in case of 100% exporter ofservices 815
46.4 Types of registration 816
46.5 Procedure for registration under service tax 816
46.5-1 Form of application and methodology 816
46.5-2 Time limit for making application for registration 817
46.6 Time limit for grant of registration 817
46.7 Amendment in service tax registration 818
46.8 Cancellation/surrender of service tax registration 818
46.9 Penal provisions for non-compliance to registration requirement 818
Annex 46.1 : Procedural issues in service tax 819
Annex 46.2 : Harmonisation of Service Tax and Central ExciseRegistration 828
Annex 46.3 : Draft common format for registration under CentralExcise and Service Tax 830
Annex 46.4 : Documents required to be submitted along with the ST-1application for the purpose of registration 832
Annex 46.5 : Documents for address proof 834
Annex 46.6 : Salient features of registration procedure 835
Annex 46.7 : New procedure and documents required in respect ofcentralised registrations 837
Annex 46.8 : Procedure for surrendering registration 845
PAGE
CONTENTS I-62
47
INVOICING REQUIREMENTS FORSERVICE PROVIDERS
47.1 Introduction 847
47.2 Invoicing requirements for service providers - Generally 847
47.3 Invoicing requirements for banking companies/financialinstitutions/non-banking financial company 849
47.4 Invoicing requirements in case of continuous supply of services 850
47.4-1 Meaning of continuous supply of service 850
47.5 Requirements for goods transport agency 851
47.5-1 Requirement to issue consignment note 851
47.6 Invoicing requirements for passenger transport service providers 851
47.7 Invoicing requirements for input service distributor 852
Annex 47.1 : Departmental clarifications on issuance of invoices, bills,challan, consignment note and other documents 854
48
PAYMENT OF SERVICE TAX
48.1 Introduction 855
48.2 Constitutional validity of reverse charge provisions 855
48.3 Overview of the scheme of payment of service tax 855
48.4 Service tax payable by the person providing taxable service 856
48.5 Periodicity and due date for payment of service tax 856
48.6 Facility to make service tax payment via electronic route 857
48.6-1 Compulsory e-payment 857
48.6-2 Designated banks for making e-payment 858
48.7 Other modes of payment of service tax 859
48.7-1 Service tax to be mandatorily deposited in designatedbank 860
48.7-2 Date of tender of banking instrument for payment ofservice tax to be specified under GAR-7 860
48.8 Accounting code for payment of service tax 860
48.8-1 Payment of tax under wrong code 860
48.9 Assessee�s code to be mentioned on service tax payment challans 861
48.10 Rounding off of tax, interest, penalty or fine etc. 861
48.11 Payment of service tax in advance 861
PAGE
I-63 CONTENTS
48.12 Provisional payment of service tax 862
48.13 Adjustment of service tax towards service not rendered 862
48.13-1 Adjustment of service tax towards service not rendered 862
48.13-2 Adjustment of excess service tax 863
48.13-3 Adjustment of excess service tax in case of renting ofimmovable property 863
48.14 Service tax collected from any person to be deposited with CentralGovernment 863
48.15 Payment of interest on excess amount of service tax collected 864
48.16 Failure to deposit service tax assessed 865
48.17 Refund of service tax erroneously deposited 865
48.17-1 Payment of interest on delayed refunds 865
Annex 48.1 : Electronic Accounting System in Excise and Service Tax(EASIEST) 866
Annex 48.2 : Implementation of EASIEST and GAR 7 Challan 869
Annex 48.3 : Payment of Service Tax 876
Annex 48.4 : Electronic Payment of Central Excise Duty and Service Taxthrough banks having Internet banking facilities 877
Annex 48.5 : Restoration of service specific accounting codes forpayment of service tax 882
Annex 48.6 : Mention of the assessee code Compulsory on TR-6/GAR-7 890
Annex 48.7 : Rate of interest on delayed refunds 891
49
ACCOUNTS AND RECORDS TO BE MAINTAINEDBY SERVICE PROVIDERS
49.1 Introduction 892
49.2 Accounts and records to be maintained by service providers 892
49.2-1 Maintenance of computerized accounts and records 892
49.2-2 Period for which the account and records need to bepreserved 893
49.2-3 List of recommended records to be maintained 893
49.3 List of records to be furnished by the service provider 893
49.4 Powers of the officer to access registered premises 894
Annex 49.1 : Maintenance and furnishing of records 895
PAGE
50
SUBMISSION OF SERVICE TAX RETURNS
50.1 Introduction 896
50.2 Form, frequency and due dates for filing service tax return 896
50.2-1 Enclosures to be filed with service tax return 897
50.3 Modes of filing service tax return 898
50.3-1 Manual filing of service tax return 898
50.3-2 Mandatory e-filing of service tax return in specified cases 898
50.3-3 Filing of service tax return through Service Tax ReturnPreparer 898
50.3-4 Filing of service tax return through registered post 899
50.4 Filing of service tax return by an input service distributor 899
50.5 Revision of service tax return 899
50.6 Consequences of delayed/non-filing of service tax returns 899
Annex 50.1 : Draft format of single Central Excise and service taxreturn 901
Annex 50.2 : Procedure for electronic filing of Central Excise andService Tax returns and for Electronic Payment ofExcise Duty and Service Tax 905
Annex 50.3 : Introduction of remedial measures to mitigate difficultiesfaced by service tax assessees in e-filing of service taxreturns 916
Annex 50.4 : Clarification regarding amendment made by FinanceAct, 2011 918
Annex 50.5 : Salient features of service tax return 919
51
ASSESSMENT, AUDIT AND ADJUDICATION
51.1 Introduction 920
51.2 Self assessment 920
51.3 Provisional assessment 921
51.4 Best judgment assessment 923
51.5 Scrutiny of service tax return 925
51.6 Special audit 926
51.7 Adjudication by central excise officer 927
51.7-1 Principles of natural justice must be followed 927
CONTENTS I-64
PAGE
51.7-2 Principles of res judicata 927
51.7-3 Powers of adjudication by central excise officers 928
51.7-4 Restriction of the powers of adjudication by the centralexcise officers 928
Annex 51.1 : Provisional assessment under service tax 930
Annex 51.2 : Scrutiny of ST-3 returns 931
Annex 51.3 : Departmental clarification on adjudication of cases 933
52
DEMAND AND RECOVERY OF SERVICE TAX
52.1 Introduction 935
52.2 Recovery of service tax under section 73 935
52.2-1 Show Cause Notice must be in writing 935
52.2-2 Issuance of statement for the subsequent period 935
52.2-3 Show cause notice must be issued under section 73 ofthe Act 936
52.2-4 DGCEI officer empowered to issue show cause notice 936
52.2-5 Show cause notice must specify the amount of servicetax payable and the basis of service tax payments 936
52.2-6 Period of limitation for service of show cause notice 936
52.2-7 Essential requirements of show cause notice 940
52.2-8 Modes of service of show cause notice 941
52.2-9 Date of service of show cause notice 941
52.2-10 Procedure of adjudication of show cause notice 942
52.3 No show cause notice to be served when service tax along withinterest is paid voluntarily 943
52.3-1 Issue of show cause notice despite voluntarily paymentof service tax 944
52.4 Determination of demand 944
52.5 Recovery of service tax from the person liable to pay the tax 944
52.6 Modes of recovery of service tax 945
52.7 CBEC�s instructions regarding initiation of recovery proceedings 946
52.8 Provisional attachment of property 947
52.9 First charge on the property of the assessee 947
Annex 52.1 : Appointment of officers by CBEC 948
Annex 52.2 : Power of adjudication of Central Excise Officers in casesrelating to Service Tax 951
I-65 CONTENTS
PAGE
Annex 52.3 : Payment of service tax with applicable interest prior toissuance of show cause notice 953
Annex 52.4 : CBEC�s instructions regarding initiation of recoveryproceedings 955
Annex 52.5 : Instructions regarding provisional attachment of propertyunder section 73C of the Finance Act, 1994 957
53
PAYMENT OF INTEREST
53.1 Introduction 960
53.2 Interest on delayed payment of service tax 960
53.2-1 Rate of interest 960
53.2-2 Computation of period of delay in payment of tax fordetermining interest liability 960
53.2-3 Interest on tax liability arising out of retrospectiveamendment in law 962
53.2-4 Levy of interest is automatic 962
53.2-5 Interest overpaid is refundable 963
53.3 Interest on delay in payment of amount in terms of the provisionscontained under Rule 6(3)(ii) of the CENVAT Credit Rules, 2004 963
53.4 Payment of interest by the department on delayed refunds ofservice tax 963
53.4-1 Payment of interest by the department on delayed refundof pre-deposited tax by the assessee 964
54
PENALTY, PROSECUTION AND COMPOUNDINGOF OFFENCES
54.1 Introduction 965
54.2 Penalty for failure to pay service tax 966
54.2-1 Quantum of penalty under section 76 966
54.2-2 Key parameters for levy of penalty under section 76 968
54.3 Penalty for delay in submission of returns 969
54.4 Penalty for other offences/non-compliances 969
54.5 Penalty for fraud, suppression, mis-representation etc. - Section 78 971
54.5-1 Essential conditions for levy of penalty under section 78 971
54.5-2 Quantum of penalty under section 78 973
CONTENTS I-66
PAGE
54.5-3 Reduction in the amount of penalty under section 78(1) 973
54.5-4 Impact of subsequent increase/reduction in the servicetax at appellate stage - Section 78(2) 974
54.5-5 Penalties under section 76 and section 78 are mutuallyexclusive 975
54.6 Penalty on officers of the company for specified contraventions -Section 78A 975
54.7 Penalty for contravention with CENVAT Credit Rules, 2004 976
54.8 Waiver of penalty - Section 80 976
54.8-1 Meaning of reasonable cause 977
54.8-2 Special dispensation from penalty in case of renting ofimmovable property - Section 80(2) of the Act 979
54.9 General guidelines for levy of penalty 979
54.9-1 Where the tax with applicable interest is paid before theissue of show cause notice 979
54.9-2 No penalty if tax involved is less than Rs. 1000 979
54.9-3 Penalty is leviable if service tax is collected but notdeposited 980
54.9-4 Burden to prove suppression is on the department 980
54.10 Prosecution provisions 980
54.10-1 Offences for which prosecution proceedings may gettriggered 980
54.10-2 Punishment for offences 981
54.10-3 Previous sanction of Chief Commissioner required 982
54.10-4 Threshold for initiating prosecution proceedings 982
54.10-5 Time limit for initiating prosecution proceedings 982
54.10-6 Prosecution in case of companies 982
54.10-7 Normally prosecution proceedings will be initiated afterdepartmental adjudication 982
54.10-8 Existence of mens rea 982
54.10-9 Cognizable and non-cognizable offences 983
54.10-10 Power to arrest 983
54.11 Compounding of offences 983
54.11-1 Meaning of compounding 983
54.11-2 Full and bona fide disclosure necessary for compoundingof offense 983
54.11-3 Composition order whether appealable 984
54.11-4 Non-compoundable offences 984
54.11-5 Procedure for compounding 985
I-67 CONTENTS
PAGE
CONTENTS I-68
Annex 54.1 : Clarification regarding rationalization of penalty provisionsand re-introduction of procecution provisions under theFinance Act, 1994 988
Annex 54.2 : Clarifications regarding prosecution provsions under theFinance Act, 1994 990
55
SERVICE TAX INVESTIGATIONS(SEARCH AND SEIZURE)
55.1 Introduction 993
55.2 Access to registered premises [Rule 5A] 993
55.3 Power to search or seize 994
55.4 Essential conditions for initiation of search operation 994
55.4-1 Meaning of �reason to believe� 994
55.4-2 Meaning of �secreted� 995
55.5 Provisions of Code of Criminal Procedure relating to searchapplicable 996
55.5-1 Section 100 of Code of Criminal Procedure, 1973 -�Persons in charge of closed place to allow search� 996
55.5-2 Section 165 of Code of Criminal Procedure, 1973 -�Search by police officer� 998
55.6 No authority to collect any amount during search and seizureoperation 998
Annex 55.1 : Department�s power to access registered premises 999
56
APPEALS AND REVISION
56.1 Introduction 1001
56.2 Appeal to Commissioner of Central Excise (Appeals) 1001
56.2-1 Who can file appeal 1001
56.2-2 Form of appeal and number of copies 1002
56.2-3 Time limit for making the appeal 1002
56.2-4 Orders against which appeal lies before Commissioner(Appeals) 1002
56.2-5 Pre-deposit of disputed demand and stay application 1003
56.2-6 Passing of order by Commissioner (Appeals) 1003
56.3 Appeal to Appellate Tribunal 1004
56.3-1 Orders against which appeal lies before Appellate Tribunal 1004
PAGE
I-69 CONTENTS
56.3-2 Persons eligible to file appeal before Appellate Tribunal 1004
56.3-3 Form of appeal and number of copies 1005
56.3-4 Time limit for making the appeal 1005
56.3-5 Monetary limit for departmental appeals 1006
56.3-6 Prescribed fee for filing of appeal before the AppellateTribunal 1006
56.3-7 Pre-deposit of disputed demand and stay application 1007
56.3-8 Filing of memorandum of cross objections 1007
56.4 Appeal to High Court 1008
56.4-1 Appealable matters 1008
56.4-2 Time limit of filing the appeal 1009
56.4-3 Fee for filing the appeal 1009
56.4-4 Monetary limit for departmental appeals 1009
56.4-5 Procedure to be followed by High Court 1009
56.5 Appeal to Supreme Court 1009
56.5-1 Appealable matters 1009
56.5-2 Limitation for filing civil appeal/special leave petition 1010
56.5-3 Monetary limit for departmental appeals 1010
56.6 Revision by Central Government 1010
56.6-1 Orders against which revision can be filed 1010
56.6-2 Time period for filing the application 1011
56.6-3 Persons eligible to file revision application 1011
56.6-4 Fee payable with revision application 1011
56.6-5 Refusal to admit revision application 1011
Annex 56.1 : Monetary limits for filing appeals by Department beforeCESTAT/High Courts and Supreme Court 1012
57
RECTIFICATION OF MISTAKES
57.1 Introduction 1014
57.2 The statutory provision 1014
57.2-1 Rectification to be made by the officer having jurisdictionon the assessee 1015
57.3 Relevant substantive and procedural aspects of rectificationproceedings 1015
57.3-1 An issue involving legal interpretation is not a mistake 1015
57.3-2 The mistake sought to be rectified must be �apparentfrom the record� 1016
PAGE
CONTENTS I-70
57.3-3 Period of limitation for passing rectification order 1017
57.3-4 Orders against which rectification application lies 1017
57.3-5 Rectification order must be passed in writing 1017
57.4 Powers of the officer conducting rectification proceedings 1018
57.4-1 Manner of initiating rectification proceedings 1018
57.4-2 Central excise officer to follow principles of natural justice 1018
57.4-3 Provisions relating to rectification of mistake cannot beused to reopen the assessment 1018
58
ADVANCE RULING
58.1 Introduction 1019
58.2 Meaning of advance ruling 1019
58.3 The Authority for Advance Ruling 1020
58.3-1 Powers of the AAR 1020
58.4 Relevant substantive and procedural aspects of advance rulingapplications 1021
58.4-1 Persons eligible to apply for advance ruling 1021
58.4-2 Advance ruling can be obtained only in respect of aproposed business activity 1024
58.4-3 Issues on which advance ruling can be obtained 1025
58.4-4 Issues on which advance ruling cannot be obtained 1027
58.4-5 Form of advance ruling application 1027
58.4-6 Fee for advance ruling application 1027
58.4-7 Person authorized to sign advance ruling application 1027
58.4-8 Submission of the application 1028
58.4-9 Withdrawal of advance ruling application 1028
58.4-10 Copy of the application to be sent to the Commissioner 1028
58.4-11 Rejection of advance ruling application 1028
58.4-12 Procedure post acceptance of application 1029
58.5 Advance ruling to be declared as void ab initio 1029
58.6 Binding nature of advance ruling 1030
59
SETTLEMENT OF DISPUTES
59.1 Introduction 1031
59.2 Constitution of Settlement Commission 1031
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I-71 CONTENTS
59.3 Relevant substantive and procedural aspects of application forsettlement of a case 1032
59.3-1 Application for settlement of case 1032
59.3-2 Application form 1033
59.3-3 Verification and signing of application form 1033
59.3-4 Fee for filing application for settlement 1033
59.3-5 Application once made cannot be withdrawn 1033
59.3-6 Circumstances when the application for settlementcannot be entertained 1033
59.3-7 Procedure for settlement of cases by the SettlementCommission 1034
59.4 Powers of Settlement Commission 1035
59.4-1 Power to order provisional attachment of property 1035
59.4-2 Powers of central excise officer 1035
59.4-3 Power to grant immunity from prosecution, penaltyand fine 1036
59.4-4 Power to remand the case to the Central Excise Officer 1036
59.5 Procedure for provisional attachment of property by order ofSettlement Commission 1036
59.6 Fee for obtaining photocopy of report 1037
PART G
AMNESTY SCHEME, 2013
60
SERVICE TAX VOLUNTARY COMPLIANCEENCOURAGEMENT SCHEME 2013
60.1 Introduction 1041
60.2 Constitutional validity of amnesty schemes 1041
60.3 Framework of VCES 1041
60.4 Key definitions 1042
60.4-1 Declarant 1042
60.4-2 Tax dues 1042
60.4-3 Designated authority 1042
60.4-4 Form 1042
60.5 Registration requirement for person opting VCES Scheme 1042
60.6 Relevant period 1043
PAGE
60.7 Period for which declaration cannot be filed 1043
60.8 Persons who cannot file the declaration 1044
60.8-1 Production of accounts, documents or other evidenceunder the Act 1045
60.9 Procedure for making the declaration 1046
60.9-1 Relevant form and period 1046
60.9-2 Relevant authority for entertaining applicationsunder VCES 1046
60.9-3 Acknowledgement of declaration 1046
60.9-4 Time limit for deposit of tax dues 1046
60.9-5 Manner of payment of tax 1047
60.9-6 Filing of proof of tax payment and issue of dischargecertificate(s) 1047
60.9-7 Payments under VCES non-refundable 1047
60.10 Benefits of opting for VCES 1047
60.11 Implications of making wrong declaration 1048
60.12 Frequently Asked Questions on VCES Scheme, 2013 1048
Annex 60.1 : Declaration to be filed by assessee 1051
Annex 60.2 : Acknowledgement of declaration by excise department 1053
Annex 60.3 : Acknowledgement of discharge of service tax dues 1055
APPENDICES
� Service Tax : Statutory Provisions 1059
� Validation Provisions 1155
� Service Tax Rules, 1994 1163
� CENVAT Credit Rules, 2004 1225
� Point of Taxation Rules, 2011 1279
� Service Tax (Determination of Value) Rules, 2006 1285
� Service Tax (Registration of Special Category of Persons)Rules, 2005 1292
� Service Tax (Advance Rulings) Rules, 2003 1298
� Authority for Advance Rulings (Central Excise, Customs and Service Tax)Procedure Regulations, 2005 1303
� Indirect Tax Ombudsman Guidelines, 2011 1313
� Service Tax (Publication of Names) Rules, 2008 1320
CONTENTS I-72
PAGE
� Service Tax (Provisional Attachment of Property) Rules, 2008 1323
� Service Tax Return Preparer Scheme, 2009 1326
� Service Tax (Settlement of Cases) Rules, 2012 1331
� Service Tax (Compounding of Offences) Rules, 2012 1337
� Place of Provision of Services Rules, 2012 1342
� Chronological compendium of notifications as in force from 1-7-2012 1347
� Chronological compendium of circulars and clarifications as in force on1-7-2012 1445
� Taxation of services : CBEC�s Education Guide 1499
� Service Tax Voluntary Compliance Encouragement Scheme, 2013 1615
� Service Tax Voluntary Compliance Encouragement Rules, 2013 1619
� Departmental clarification on Service Tax Voluntary ComplianceEncouragement Scheme 1626
SUBJECT INDEX 1629
LIST OF NOTIFICATIONS i
LIST OF CIRCULARS/LETTERS/ORDERS/TRADE NOTICES iii
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