Negative List of Services

Transcription

1 CA. Bharat Shemlani Negative List of Services There is paradigm shift in the manner in which taxation of service is taking place w.e.f Except negative list of services, all services are made liable to service tax under new regime. Section 66D of FA, 1994 (Finance Act, 1994) deals with the negative list of services and brief analysis of said negative list is given hereinbelow. 1. Services by Government or a local authority excluding the following services to the extent they are not covered elsewhere in the FA, 1994 (iv) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government; services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; transport of goods or passengers; or support services, other than services covered under clauses to above, provided to business entities; 1.1 The phrase Government is not defined in the FA, As per section 3(23) of the General Clauses Act, 1897 'Government' includes both Central Government and any State Government. 'Government' would include various departments and offices of the Central or State Government or the U.T. Administrations which carry out their functions in the name and by order of the President of India or the Governor of a State 65B(31) to mean: (a) (b) (c) (d) (e) (f) (g) a Panchayat as referred to in clause (d) of Article 243 of the Constitution; a Municipality as referred to in clause (e) of Article 243P of the Constitution; a Municipal Committee and a District Board, legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund; a Cantonment Board as defined in section 3 of the Cantonments Act, 2006; a regional council or a district council constituted under the Sixth Schedule to the Constitution; a development board constituted under Article 371 of the Constitution; or a regional council constituted under Article 371A of the Constitution; SS-II-41 55

2 Negative List of Services The definition of local authority is specific and it would not include other bodies which are merely described as a local body by virtue of a local law. The regulatory bodies and other autonomous entities, which attain their entity under an act would not comprise either government or local authority. 1.3 Support services defined in section 65B(49) to mean infrastructural, operational, administrative, logistic, marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion, construction or works contract, renting of immovable property, security, testing and analysis. 1.4 Business entity is defined in section 65B(17) to mean any person ordinarily carrying out any activity relating to industry, commerce or any other business or profession. 1.5 For the support services provided by the Government, other than where such support services are by way of renting of immovable property, to business entities, government departments are not required to get themselves registered because service tax is payable on such services by the service receiver i.e. the business entities receiving the service under reverse charge mechanism in terms of the provisions of section 68 of the FA, 1994 and Tax Rules, For services mentioned at to under point 1 above service tax is payable by the concerned department providing said services. 2. Services by the Reserve Bank of India 2.1 The Reserve Bank of India (RBI) is defined in section 65B(42) to mean the bank established under section 3 of the Reserve Bank of India Act, Further, only services provided by RBI are covered under negative exempted are liable to tax. Earlier, services provided to RBI, where RBI was liable to pay tax as recipient of service were also exempt from Service Tax under Notification No. 3. Services by a foreign diplomatic mission located in India 3.1 Any service provided by a diplomatic mission of any country located in India is in the negative list. However, this entry does not cover services, if any, provided by any office or establishment of an international organisation. 3.2 It is to be noted that, services provided to foreign diplomatic mission or consular post in India or family members of diplomatic Services relating to agriculture or agricultural produce by way of (iv) agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or seed testing; supply of farm labour; processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market; renting or leasing of agro machinery or vacant land with or without a structure incidental to its use; 56 SS-II-42

3 (v) (vi) loading, unloading, packing, storage or warehousing of agricultural produce; agricultural extension services; (vii) services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce; 4.1 According to entry 14 of List II State List, the State Government is empowered to levy tax on agriculture, including agricultural education and research, protection against pests and prevention of plant diseases. 4.2 The agriculture is defined in section 65B(3) to mean the cultivation of plants and rearing of all life-forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products. A detailed clarification issued on titled as Education Guide provide that activities like worms (sericulture), cultivation of ornamental are also covered under the definition of agriculture. research and knowledge to agricultural practices through farmer education or training. 4.4 The agricultural produce is defined in section 65B(5) to mean any produce of agriculture on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market. In Education Guide, it is stated that plantation crops like rubber, tea or coffee are also covered under agricultural produce. However, potato chips or tomato ketchup are manufactured through processes which alter the essential characteristic of farm produce i.e. potatoes and tomatoes, and therefore, not covered under term agricultural produce. 4.5 The Agricultural Produce Marketing Committee or Board is defined in section 65B(6) to mean any committee or board constituted under a State law for the time being in force for the purpose of regulating the marketing of agricultural produce. 4.6 Services provided by a commission agent for sale or purchase of agricultural produce are also covered under negative list. Earlier, Business Auxiliary Services provided by Commission Agent in respect of agriculture produce were exempt from (as amended). 5. Trading of goods 5.1 No definition of trading of goods provided in the FA, The Education Guide and commodity futures are covered under the purview of trading of goods. of title in goods or immovable property by way of sale, gift or any other manner. The trading of goods is synonymous to sale of goods. 6. Any process amounting to manufacture or production of goods 6.1 The expression process amounting to manufacture or production of goods is on which duties of excise are leviable under section 3 of the Central Excise Act, 1944 or any process amounting to manufacture of alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs and narcotics on which duties of excise are leviable under any State Act for the time being in force. 6.2 Thus, Service tax is leviable on processes, not amounting to manufacture or production SS-II-43 57

4 Negative List of Services of goods carried out by a person for another for consideration. 6.3 It is to be noted that, if Central Excise duty is leviable on a particular process, as the same amounts to manufacture, then such process is covered in the negative list even if there is a Central Excise duty exemption for such process. However, if Central Excise duty is wrongly paid on a process which is not a manufacture, then same will not be covered under negative list. 7. Selling of space or time slots for advertisements other than advertisements broadcast by radio or television 7.1 The taxes on advertisement other than advertisement published in the newspapers and advertisement broadcast by radio or television are covered under List II State List (entry 55) and are subject matter of the State, hence covered under negative list. 7.2 The expression 'Advertisement' has as any form of presentation for promotion of, or bringing awareness about, any event, idea, immovable property, person, service, goods or actionable claim through newspaper, television, radio or any other means but does not include any presentation made in person. 7.3 Following services are not liable to service tax; a) Sale of space for advertisement in print media b) Sale of space for advertisement in bill boards, public places (including stadia), buildings, conveyances, cell phones, automated teller machines, internet. c) Aerial advertising. 7.4 It is to be noted that, services provided by advertisement agencies relating to making commission received by advertising agencies are not covered under this entry and therefore liable to tax. 8. Service by way of access to a road or a bridge on payment of toll charges 8.1 The tolls are covered under List II State List (entry 59) and are subject matter of the State, hence covered under negative list. 8.2 The negative list entry only covers access to a road or a bridge on payment of toll charges. Services of toll collection on behalf of an agency authorised to levy toll are in the nature of services used for providing the negative list services. As per the principle laid down in section 66F(1) of FA, 1994, the reference to a service by nature or description in the FA, 1994 will not include reference to a service used for providing such service. 9. Betting, gambling or lottery 9.1 The above activity is covered under List II State List (entry 62) and is subject matter of the State, hence covered under negative list. section 65B(15) of FA, 1994 as putting on stake something of value, particularly money, with consciousness of risk and hope of gain on the outcome of a game or a contest, whose result may be determined by chance or accident, or on the likelihood of anything occurring or not occurring. 9.3 Auxiliary services that are used for organising or promoting betting or gambling events are not covered under negative list. 10. Admission to entertainment events or access to amusement facilities 10.1 The above activity is covered under List II State List (entry 62) and is subject matter 58 SS-II-44

5 of the State liable to entertainment tax, hence covered under negative list The entertainment event is defined in section 65B(24) of FA, 1994 to mean an event or a performance which is intended to provide recreation, pastime, fun or enjoyment, circus, concerts, sporting event, pageants, award functions, dance, musical or theatrical performances including drama, ballets or any such event or programme. section 65B(9) of FA, 1994 to mean a facility where fun or recreation is provided by means of rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks, theme parks or such other places but does not include a place within such facility where other services are provided. The restaurant and accommodation facilities attached to amusement facility are excluded from the definition and therefore liable to tax. 11. Transmission or distribution of electricity by an electricity transmission or distribution utility 11.1 An 'electricity transmission or distribution utility' has also been defined in section 65B(23) of the FA, It includes the following Act, 2003; 2003; licensed under the said Act; and function by the Central or State Government The services provided by way installation of gensets or similar equipment by private contractors for distribution of electricity is not covered by this entry. 12. Services by way of pre-school education and education up to higher secondary school or equivalent; education as a part of a curriculum for any law for the time being in force; and education as a part of an approved vocational education course In negative list only such educational services are covered which are related to delivery of education as 'a part' of the curriculum that has been prescribed for obtaining a qualification prescribed by law. Conduct of degree courses by colleges, universities or institutions which lead grant of However, training given by private coaching institutes are not covered as such training does Further, services provided by international schools giving international certifications like IB, IGCSE also covered under negative list The approved vocational education course is defined in section 65B(11) to mean, a course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training offering courses Apprentices Act, 1961 (52 of 1961); or a Modular Employable Skill Course, approved by the National Council of SS-II-45 59

6 Negative List of Services Vocational Training, run by a person registered with the Directorate General of Employment and Training, Union Ministry of Labour and Employment; or a course run by an institute affiliated to the National Skill Development Corporation set up by the Government of India; 12.3 The Boarding Schools providing services of education coupled with other services like providing dwelling units for residence and food, etc. For taxation such services are considered as Bundled Services and taxability of such services will be determined in terms of the principles laid down in section 66F of FA, In this case the dominant nature is providing education and therefore covered under negative list. 13. Services by way of renting of residential dwelling for use as residence Section 65B(41) defines renting as allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property The phrase 'residential dwelling' has not been defined in the Act. It has therefore to be interpreted in terms of the normal trade parlance as per which it is any residential accommodation, but does not include hotel, motel, inn, guest house, camp-site, lodge, house boat, or like places meant for temporary stay. The issue may arise about the taxability of longer stay in hotels, motels, etc. as whether such longer stay would convert them into residential dwelling and therefore not liable to tax Further, renting of a residential dwelling, which is used only or predominantly for commercial or non-residential use is also not covered under negative list. In cases of residential dwellings, partly used for residential and partly for commercial purpose, reference would have to be made to section 66F as the same are treated as provision of bundled service. 14. Services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount; inter se sale or purchase of foreign currency amongst banks or authorised dealers of foreign exchange or amongst banks and such dealers; 14.1 This entry covers any such service wherein moneys due are allowed to be used or retained on payment of interest or on a discount. The words used are 'deposits, loans or advances and have to be taken in the generic sense. They would cover any facility by which an amount of money is lent or allowed to be used or retained on payment of what is commonly called the time value of money which could be in the form of an interest or a discount. However, this entry does not cover investments by way of equity or any other manner where the investor is 14.2 Bill discounting or cheque discounting or any other similar form of discounting is covered in the negative list Further, this entry covers sale and purchase of foreign exchange between banks or authorised dealers of foreign exchange or between banks and such dealers. Any service provided in respect of sale or purchase of foreign exchange to general public is not covered in this entry. 15. Service of transportation of passengers, with or without accompanied belongings, by 60 SS-II-46

7 (iv) a stage carriage; railways in a class other than (B) an airconditioned coach; metro, monorail or tramway; inland waterways; (v) public transport, other than predominantly for tourism purpose, in a vessel between places located in India; and (vi) metered cabs, radio taxis or auto rickshaws 15.1 The stage carriage according to section 65B(46) of FA, 1994 shall have the meaning assigned to it in clause (40) of section 2 of the Motor Vehicles Act, In case of transportation passengers by coach is not covered under negative list. All other classes are covered under negative list According to section 65B(29) of FA, 1994 inland waterway means national waterways as defined in clause (h) of section 2 of the Inland Waterways Authority of India Act, 1985 or other waterway on any inland water, as Vessels Act, any contract carriage on which an automatic device, of the type and make approved under the relevant rules by the State Transport the fare chargeable at any moment and that is charged accordingly under the conditions of its permit issued under the Motor Vehicles Act, 1988 and the rules made thereunder. 16. Services by way of transportation of goods by road except the services of (A) (B) a goods transportation agency; or a courier agency; by an aircraft or a vessel from a place outside India up to the customs station of clearance in India; or by inland waterways; 16.1 The section 65B(26) defines goods transport agency (GTA) as any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called. Therefore, services provided by GTA are not covered by this entry. But service provided by Goods Transport Operators i.e. basically owners cum drivers of vehicle who do not issue any consignment note are covered under this entry Transportation of goods from outside India up to the customs station of clearance in India is also covered in this entry. 17. Funeral, burial, crematorium or mortuary services including transportation of the deceased 17.1 The above services provided by any person are non-taxable under this entry. Further, the transportation of dead body by any mode of transport i.e. by road, water, air and rail are covered here. Before parting, the negative list based taxation positive growth in budgeted service tax collection during the current year, though the overall economy may not show positive growth. SS-II-47 61