SERVICES TAX TAXABLE SERVICES FAQ

Transcription

1 SERVICES TAX TAXABLE SERVICES FAQ Legal obligation of Assessee If a person falls within in the ambit of a person liable to pay the service tax and if the service provided by him has not been expressly or specifically exempted from the levy, he would then have to discharge the minimum legal obligations as given below :- Registration - Application for registration in Form ST-1 in duplicate has to be made to the proper officer who will issue the registration certificate in Form ST-2 after the scrutiny of the application. Records - Records (including private or maintained under any law in force and whether computerised or written manually) which contain the data of amounts received in lieu of services should be neatly maintained and preserved. Payments of Service Tax - Value of taxable services has to be computed in the manner laid down in the Section 67 of Finance Act, 1994 and the service tax thereon 12% advolarem and education tax 2% on 12%. The tax is to be paid through TR-6 challans in the nominated Banks by the due date in terms of Section 68 ibid. Return - Return in Form ST-3/ST-3(A) has to be filed by the due dates in terms of Section 70 ibid. Assessments The assessment will be made half-yearly when the assessee files the half-yearly return in Form ST-3 in triplicate. The assessment shall be completed on the basis of the particulars furnished in the half-yearly return ST-3 and ST-3A, wherever submitted. The triplicate copy of the half-yearly return so assessed shall be sent to the assessee. In case where the Service Tax assessed is more than the service tax determined and paid by the assessee, the assessee shall pay the deficiency alongwith the amount of interest determined thereon within 10 days of the receipt of the copy of the half-yearly return from the Central Excise Officer. The assessee may also apply for refund whenever he has paid service tax more than the tax assessed. Stock Brokers Q.1 Who is a Stock Broker? When does the service provided by Stock Broker become liable to pay Service Tax? Stock Broker is a person who has either made an application for registration or is registered as a stock broker under the rules and regulations of Securities and Exchange Board of India Act, The service provided by the stock broker becomes liable to levy of when

2 a. Stock Broker is registered as per SEBI Act, b. Stock is listed in the Stock Exchange. c. The Stock Exchange is recognised Stock Exchange as per Securities Contract (Regulation) Act, d. The Sale/Purchase are on behalf of an investor. Q.2 What is the value of taxable service in case of service provided by Stock Broker? The value of the taxable services, provided by a Stock Broker, is the aggregate of the commission or brokerage charged by such broker on the sale or purchase of securities from the investors and includes the commission or brokerage paid by the broker to any sub-brokers. Q.3 Are there any transactions/charges undertaken/received by Stock Broker which are not chargeable to Service Tax? If so which are those transactions? Following transactions undertaken by the Stock Brokers do not attract the levy of Service Tax :- a. Private placement charges, b. Public issue consultancy fee, c. Brokerage for primary market operations, d. Stock Broker s own transaction. e. Jobbing business. f. Arbitrage. Q.4 Is a Stock Broker required to have separate registration for each of the offices when all offices are not falling within the same Commissionerate? No, a Stock Broker registered with a particular Stock Exchange has to apply for registration with the Commissioner of Central Excise having jurisdiction over the place in which the concerned Stock Exchange is situated, irrespective of whether all the offices of the Stock Broker are situated within or outside the jurisdiction of the said Commissionerate. Q.5 Whether a suspended share broker should continue to hold registration or should surrender the registration? a. When a registered assessee ceases to carry on the service for which he is registered, he should surrender his registration certificate immediately to the Central Excise authority. b. A suspended share broker can continue to hold registration, if he so desires, but he should then file NIL return to the Central Excise authority Telephone Companies Q.1 What is the taxable service in respect of telecom services? Taxable service in respect of telecom sector is the service provided to a subscriber by the telegraph authority in relation to a telephone connection.

3 Q.2 What is the value of taxable service in case of telephone services? In case of Telephone Services, the value of taxable service is the gross total amount (including adjustment from any deposits, surcharge, etc.) charged by the telegraph authority to the subscriber in the bills. Authority :- Board Circular No.29/3/99 dated , F.No.149/5/97- CX.4. Q.3 Is there any exemption for any sector in Service Tax on telephone services? Yes, the telephone services provided to the following are exempted from payment of Service Tax U.N. or an International Organisation. Specified diplomatic mission or its Members. Departmentally run public telephones for local calls. Guaranteed public telephone only for local calls. Free telephones at Airports and Hospitals where no bills are being issued. {Authority:- Notfn.3/94-ST dt , 5/96 dated 3/4/96 and 13/97 dated 14/02/97} Q.4 In cases of plastic roaming facility introduced by Cellular Phone Companies, who would be liable to pay the service tax the operator (home operators) with whom the customer have subscribed or the operator (service operator) where the customer is visiting? In the case of plastic roaming facility, the liability to pay Service Tax is on the home operator (home network), to whom the subscriber is attached, as he is the one, who arranges roaming facility in other metro cities through arrangements with the service operators (visiting network). Q.5 Is the rent and access charge for providing junctions for mobile operation to cellular telephone operators by DOT will be subject to Service Tax. No, the Service Tax is not chargeable on rent and access charges paid to DOT by cellular phone operators. Q.6 Is the cost of Sim Card excludible from activation charges to be collected from subscribers for the purposes of levy of Service Tax? No, The amount received by the cellular telephone Company from subscribers towards Sim Card would form part of the taxable value for levy of Service Tax. As the sim Card unlike the telephone instrument cannot be purchased by the customer from elsewhere, the charges towards the Sim Card are viewed as processing charges for activating the cellular phone. Q.7 Whether a prepaid SIM card is chargeable to Service Tax? Yes. All the prepaid SIM cards are chargeable to Service Tax. Q.8 Whether the free telephone provided by a telephone company to their employees and friendly users from whom they do not recover any charges are liable for payment of Service Tax. No, when the service is provided free, there is no liability under Service Tax

4 Q.9 Whether the cellular company can allow discount on their air-time charges and in such cases are they eligible to pay tax only on reduced amount? Yes. In cases where the telegraph authority has extended services at a discounted price, the Service Tax liability is limited to the discounted price so charged. Q.10 Is Service Tax leviable on the interest accrued on refundable deposits? No, interest earned on refundable deposits has got no nexus with the value of taxable service. Therefore, the Service Tax is not leviable on interest earned on refundable deposits. Q.11 In respect of Secondary Switching Areas, what would be relevant date for the purpose of calculation of interest in the event of late payment of tax? The first date on which the Secondary Switching Areas makes the book transfer to the DOT would be taken as the date of crediting to the Central Govt. for the purpose of assessment and calculation of interest. Q.12 Q. Whether the value of taxable service provided by Telephone department and those provided by pager companies would include the surcharge collected on delayed payment for charging service tax.? The value of taxable service in relation to Telephone and Pagers is the gross total amount charged from the subscribers by the Telephone authority. Since the surcharge is also an amount charged from the subscribers. Whenever the subscriber fails to pay the bill within the prescribed period; the service tax shall also be chargeable on the surcharge amount. ( Authority : Board circular No.29/03/99 dt ) Q.13 Are the Public Mobile Radio Trunking (PMRT) services covered under the service tax net? In common parlance 'Telephone' is understood to mean as transmission of speech to a desired person beyond the limits of ordinary audibility. Further a 'telephone connection' would mean connecting two telephone apparatus so as to enable a caller to avail the speech transmission facility to the desired person. PMRT also enables a subscribers to transmit speech over long distance to a desired person. Further PMRTS providers have been granted licence to operate their services under the first proviso to subsection (1) of Section 4 of the Indian Telegraph Act Therefore, PMRTS providers can be treated as telegraph authority within the meaning assigned to it under Section 65 (49) of the Finance Act 1994 and the services provided by them as the taxable services in respect of Telephone connections. Authority: DG(ST)'S letter F.NO. V/DGST/(21) (6) Tele/5/99 dt General Insurance Companies Q.1 What is the taxable service under insurance sector? Taxable service under insurance sector is the service provided to a policy holder, by an insurer carrying on general insurance business, i.e. fire, marine and miscellaneous insurance business.

5 Q.2 What is the value of taxable service in case of Insurance Services? In the case of Insurance services, the value of taxable service is the total amount of premium received by the insurer from policyholder. Q.3 Are any of the Insurance activities exempted from the levy of Service Tax? If so, what are they? Following activities under insurance sector are exempt from the levy of Service Tax. a. Life Insurance b. General insurance services provided to U.N or International organisations. c. Services provided to policy holder of Jan Arogya Bima policy in relation to General Insurance business. d. General insurance business for non life insurance premium to specified Diplomatic mission. e. Personal Accident, social security and Hut Insurance Scheme. f. Comprehensive crop Insurance Scheme. g. Cattle Insurance under Integrated Rural Development Programme. - h. Janata Personal Accident Policy and Gramin Accident Policy. - i. Group Personal Accident Policy for self-employed women. - j. Agricultural Pumpset and failed well Insurance. k. Premia collected on insurance of Export of goods from India and Export Credit Insurance. l. Premium received from Re-insurance both domestic and overseas. - m. All business for which premium is booked outside India. n. Small transactions involving premium of less than rupees fifty except Motor insurance. {Authority :- Notfn.3/94-ST dt , No. 10/97-ST dated and 12/97-ST dated 14/2/97}. Courier Agencies Q.1 What is a Courier Agency? What is the taxable service provided by them? Courier Agency means a commercial concern engaged in the door to door transportations of time sensitive documents, goods or articles, utilising the services of a person either directly or indirectly to carry or accompany such documents, goods or articles. Services provided by a Courier Agency to their client in respect of door to door transportation of time sensitive documents, goods or articles constitute taxable service for the purpose of the levy of service tax. Q.2 What is the value of the taxable service in relation to Courier Service? Value of the taxable service in relation to Courier Service is the gross amount charged by such agency from the customer for services in relation to door to door transportation of time sensitive documents, goods and articles. Q.3 Is the facility of Centralised registration available to Courier Agencies? It was originally provided that a Service Tax assessee has to obtain separate registrations in respect of the offices or premises where from they would be carrying on their business. However,

6 in the case of courier agencies, facility of centralised registration and collection has been extended. A detailed procedure also has been set down for the same. This facility has now been extended to all services wherever Centralised billing pattern is followed Q.4 Are services provided by Co-loader chargeable to Service Tax separately? No, as `Co-loader is a company whose services are engaged by a Courier Agency for handling part of the job for delivery of articles, goods, documents, etc. they are not providing any direct service to the customer. The client is concerned only with the Courier Agency, for the services and the co-loader is only a sub-contractor. Q.5 Is any courier agency undertaking comprehensive business and providing integrated transportation, warehousing, packing, inventory management etc. liable to pay Service Tax in respect of services provided by them in relation to warehousing, packing, inventory management, etc. Yes, wherever the above facilities are relatable to door to door transportation of documents, goods and articles and are undertaken by the courier agencies themselves, the charges for such facilities are correctly includible in the gross amount. Q.6 Are Express Cargo Service provider, who assure delivery of documents, goods or articles within stipulated time period, liable to pay tax as Courier Agencies? Yes. The nature of service provided by these Express Cargo Transporters is the same as the services provided by the conventional courier agencies. Therefore, these Express Cargo Services are also liable to pay Service Tax. Q.7 Do the Speed Post services provided by Department of Post attract Service Tax? No. Since the Department of Post is not a commercial concern, the Speed Post services provided by it do not attract Service Tax. Q.8 Are the Angadias liable for payment of Service Tax? Yes, Angadias engaged in commercial activities such as undertaking of delivery of the documents, goods, or articles received from the customer to other end, are covered by the definition of " Courier Agency" and are liable to pay the Service Tax on the value of services provided by them. Q.9 Is there any exemption from payment of Service Tax on services provided by Courier agencies? Yes, the services provided by the Courier Agencies to United Nations, certain International Organisations and specified Diplomatic Missions are exempted from payment of service tax. ( Authority : Notification no. 45/98 dated 22/01/98, 44/98 dated 22/1/98, 47/98 ST dated 24/4/98) Advertising Agencies Q.1 What is an Advertising Agency? What is the taxable service with regard to advertising? Advertising agency is any commercial concern engaged in providing any services connected with

7 the making, preparation, display or exhibition of advertisement and includes an advertising consultant. Services provided to a client by advertising agency in relation to advertisement in any manner are defined to be the taxable services. Q.2 What is the value of taxable service in case of Advertising Services? The value of taxable services in relation to service provided by an advertising agency to a client is the gross amount charged by such agency from the client for services in relation to advertisements. This includes the gross amount charged by the agency from the client for making or preparing the advertisement material, irrespective of the fact that the advertising agency directly undertakes the making or preparation of advertisement or gets it done through another person as well as the commission received by the agency. However, the amount paid excluding their own commission by the advertising agency, for space and time in getting the advertisements published in the print media (i.e. newspapers, periodicals, etc.) are not includible in the value of taxable service. Q.3 Are the expenses incurred by the advertising agency on account of travel, transportation and stay in hotels etc. excludible for computing the value of taxable service? No. Since the value of taxable service is the gross amount charged by the advertising agency in relation to the services rendered to his client, the charges on account of travel, transportation and hotel stay, which form part of the bill correctly forms part of the value of the taxable service. Q.4 Are the expenses incurred by Advertising Agency in doing market survey/research excludible from value of taxable service? No, If the market Survey / Research relates to the advertisement, and all expenses are charged from the client on this account, they are correctly includible in the value of taxable service. Q.5 Is Directorate of Audio and Visual Publicity (DAVP) in the Ministry of Information and Broadcasting liable to pay Service Tax on the services rendered by it to various Departments of the Central Government in relation to Government Advertising? No. DAVP not being a commercial concern is not liable to pay Service Tax in respect of the services rendered by it to other Central Government Departments. Q.6 Is it true that when advertisement is released directly in the newspapers by a client (i.e. not through an advertising agency), no Service Tax is levied while the same advertisement is released in the news paper through advertising agency on behalf of the same client, the Service Tax become leviable on the commission of the Advertising Agency? If so what is the reason for this distinction? In case of direct advertising by the clients, no service is being provided, hence no Service Tax would be payable. However in cases where the advertisement is released through Advertising Agencies, a service has been rendered by the latter. Hence, the Service Tax would be leviable on the agency charges of the Advertising Agency, not on the total charges recovered from the clients. Q.7 In the case of service provided by advertising agency, is Service Tax liable to be paid on the total cost of printing undertaken on behalf of advertising agency, charged by the printer from the advertising agency or is any deduction allowed to the advertising

8 agency, on the expenditure due to the cost of paper and printing?. Yes, Service Tax would be payable on the gross amount charged by the Advertising Agency from the Clients. The exclusion of cost of paper and printing is not permissible, as it constitutes a component of service provided Q.8 Is there any exemption from payment of Service Tax on services provided by the Advertising Agencies? Ans Yes, the services provided by the Advertising Agencies to United Nations, certain International Organisations and specified Diplomatic Missions are exempted from payment of service tax. ( Authority : Notification no. 45/98 dated 22/01/98, 44/98 dated 22/1/98, 47/98 ST dated 24/4/98) Q.9 Can Cinema theatres be treated as advertisement agencies as they project advertisement? Ans The Cinema theatres cannot be treated as advertisement agencies as they project advertisements only on behest of advertising agencies. Further it has already been clarified that the amount paid by advertising agency for space and time in getting the advertisement published in print media (i.e. newspapers, periodicals etc), or the electronic media (Doordarshan, Private T.V. Channels, AIR, Cinema theatres etc) will not be includible in the value of taxable service for the purpose of levy of Service Tax. Radio Paging Companies Q.1 What is Pager? A Pager is an instrument, apparatus or appliance which is a non-speech, one way personal calling system with alert and has the capability of receiving, storing and displaying numeric or alphanumeric messages. Q.2 What is the taxable service in respect of pager services? The taxable service in respect of pager services is the service provided to a subscriber, by the telegraph authority in relation to a pager. Q.3 What is the value of taxable service in case of Pager services? In case of pager services, the value of taxable services is the gross total amount (including adjustment made by the telegraph authority from any deposit made by the subscriber at the time of application for pager) charged by the telegraph authority from the subscriber. Q.4 Has any exemption been provided in case of pager services? Yes, the pager services provided to U. N. or International Organisation would not be chargeable for service tax. ( Authority:- Notification no. 48/98 ST dated 2/6/98 ) Custom House Agents Q.1 Who is a Custom House Agent?

9 "Custom House Agent" is a person licensed, temporarily or otherwise, under the regulations made under sub-section (2) of section 146 of the Customs Act, A person is permitted to operate as a customs house agent, temporarily under regulation 8(1) and permanently under regulation 10, of the Customs House Agents Licensing Regulations, Q.2 What is the Taxable Service in the case of a Custom House Agent? The taxable services rendered by a Custom House Agent (CHA) means any service provided to a client by a CHA in relation to the entry or departure of conveyances or the import or export of goods. The services rendered by CHA are not merely limited to the clearing of the import and export consignment. The CHA also renders the service of loading/unloading of import or export goods from/at the premises of the exporter/importer, the packing, weighment, measurement of the export goods, the transportation of the export goods to the customs station or the import goods from the formalities such as payment of expenses on account of octroi, destuffing /pelletisation terminal handling, fumigation, drawback/deec processing, survey /amendment fees, dock fees, repairing and examination charges, landing and container charges, statutory labour charges, testing fees, drug control formalities, sorting /marking/stamping/sealing on expenses such as crane/fork lift charges, taxi charges, photostat and fax charges, bank collection charges, courier service charges, and miscellaneous other expenses on account of the importer /exporter. For all the above charges, the CHA is ordinarily reimbursed by the importer/ exporter for whom the above services are rendered. Apart from the above charges, the CHA also charges the client for his services under the head /nomenclature of "agency and attendance charges " or similar kind of heads which is purported to be his service charge in respect of the services rendered in relation to the import/export goods. Q.3 What is the value of Taxable Service in case of custom house agent? The value of the taxable service provided by a CHA to a client is the gross amount charged by such agent from the client for services rendered in any manner in relation to import or export of goods. The Service Tax is to be computed only on the gross service charges, by whatever head/nomenclature, billed by the CHA to the client. Sometimes, the charges for service are shown as "agency commission", "charges", "agency and attendance charges", "agency charges" or other similar descriptions. The Service Tax will be computed only with reference to such charges. The payments made by CHA on behalf of the client, such as statutory levies (Cess, Customs Duties, Port dues etc.) and various other reimbursible expenses incurred are not to be included in the value of taxable service for computing the Service Tax. Q.4 What is the value of taxable service provided by a CHA in case of turnkey Import / Export? In many cases the CHA provides services for imports and exports on turnkey basis where a lump sum amount is charged from the client for undertaking various services. The said lump sum amount covers not only the "agency commission" fee but also other expenses and no separate break-up is given in respect of these expenses. In such cases, the value of the taxable Service Tax shall be 15% of the lump sum amount charged to the client. Service Tax of 5% will be chargeable on the above 15%. Q.5 Is Service Tax chargeable separately from Sub-Contractor CHA, where main CHA sub

10 contracts work to another CHA located in other station? Whenever CHAs sub-contract their work to CHAs located in other stations, it is possible that the sub contracting CHA raises the bill on the main CHA who in turn raises the bill to the client. In such cases the sub-contracting CHA will not be required to pay Service Tax on the bills raised by him on the main CHA. The Service Tax will be payable by the CHA who provides the actual service to the client and raises the bill on the client. Q.6 Would Centralised registration/payment of tax be permitted in the case of CHAs having office in different places but bills are raised in the central office?. Yes. Even if the C.H.A. has many branches at different stations, but the billing is done only from the main or central office, only such office needs to be registered for Service Tax purposes. Q.7 Is the Service Tax leviable on the charges received by CHA from the Shipping Lines for canvassing of Import / Export cargo? Ans No. The payment received by the CHA from the Shipping Lines for canvassing of Import / export Cargo, would not be chargeable to Service Tax as these activities do not fall within the ambit of taxable services provided by a CHA. Q.8 Is the service provided by a CHA to any Government Department exempted from payment of Service Tax? No. The service provided by a CHA to the Government Department has not been exempted from payment of Service Tax. Q.9 Are the services provided by CHAs to Diplomatic Missions exempt from payment of service tax? Not always, only the services rendered by CHAs to UN or certain International organisations and a few notified diplomatic missions are exempt from payment of Service Tax. Steamer Agents Q.1 Who is a "Steamer Agent"? "Steamer Agent" is a person who undertakes, either directly or indirectly. a. to perform, any service in connection with the ship husbandry or dispatch including the rendering of administrative work related thereto; or b. to book, advertise or canvass for cargo for or on behalf of a shipping line; or to provide container feeder services for or on behalf of a shipping line; Q.2 What is the taxable service in case of services provided by a Steamer Agent? The taxable service provided by a steamer agent to a shipping line, is the service in relation to a ship s husbandry or dispatch or any administrative work related thereto as well as the booking, advertising or canvassing of cargo, including container feeder services. Q.3 What is the value of taxable service in case of Steamer Agent?

11 The value of the taxable service in relation to service provided by a steamer agent to a shipping line, is the gross amount charged by such agent from the shipping line for services in relation to a ship s husbandry or dispatch or any administrative work related thereto or in relation to the booking, advertising, or canvassing of cargo container feeder services including the commission paid to such agent. Steamer agents incur various types of expenses on behalf of the shipping line such as pilottage and berth hire charges, Indian Coast light dues paid to the port authorities, cargo expenses paid to port authorities and transporters such as CONCOR/railways, private transporters, chartered accountants fee, income tax, brokerage paid on export cargo, ship handling expenses paid to stevedoring agents. For all the above charges the Steamer agent is ordinarily reimbursed by the shipping line. Further, the steamer agent bills the principals i.e. the shipping line, for two types of service charges husbandry fee, which they charge for a ships husbandry and the agency commission, which is paid by the shipping line on the import and export cargo. These commissions are usually paid as a percentage of the net ocean freight (basic freight) which is clearly indicated in the agreement entered into between the steamer agent and shipping line. In relation to the steamer agent, the service charges will constitute the husbandry fee as well as the agency commission on import/export cargo. Other expenses incurred by the steamer agent on behalf of the shipping line shall not be taken into account. Q.4 Is the registration in respect of Steamer Agents allowed only of their seaport offices or the branch offices also? Ans Only sea port offices of the steamer agent which are raising the bill to the shipping lines should be registered for the purposes of Service Tax. Branch offices in ICDs which are more in the nature of sales offices and which do not raise the bill, would not have to be registered. Q.5 Is the container handling service provided by Steamer Agent to be charged to the Service Tax? Ans Yes. The container handling service provided by Steamer Agent and payment received thereof, would be liable for payment of Service Tax under the category of service provided by the Steamer Agent. Consulting Engineers Q.1 Who is a "Consulting Engineer"? Consulting Engineer is any professionally qualified engineer or engineering firm who, either directly or indirectly, renders any advice, consultancy or technical assistance in any manner to a client in one or more disciplines of engineering. Consulting engineers include self-employed, professionally qualified engineers, who may or may not have employed others to assist them or it could be an engineering firm- whether organised as a sole proprietorship, partnership, a private or a public Ltd. Company. Q.2 What is the taxable service in case of consulting engineer?

12 The taxable service rendered by a consulting engineer means any service provided to a client, by a consulting engineer in relation to advice, consultancy or technical assistance in any manner in one or more disciplines of engineering. The services which attract the levy include all the services which are rendered in the capacity of a professional person and specifically include the services pertaining to structural engineering works, civil/mechanical/electrical engineering works or relating to construction management. All services rendered within the scope of the term engineering attract Service Tax provided they are rendered in the capacity of a consulting engineer. The scope of the services of a consultant may include any one or more of the following categories :- i. Feasibility study; ii. Pre-design services/project report; iii. Basic design engineering; iv. Detailed design engineering; v. Procurement; vi. Construction supervision and project management; vii. Supervision of commissioning and initial operation; viii. Manpower planning and training; ix. Post-operation and management; x. Trouble shooting and technical services, including establishing systems and procedures for an existing plant. The list is only illustrative. Q.3 What is the value of taxable service in case of consulting engineer? The value of taxable service in relation to the services provided by a consulting engineer to a client is the gross amount charged by such engineer from the client for advice, consultancy or technical assistance in any manner in one or more disciplines of engineering. Q.4 Is Service Tax chargeable on Sub Consultant appointed by main consulting engineer? No. The services should be rendered to a client directly, and not in the capacity of a subconsultant/associate consultant to another consulting engineer, who is the prime consultant. In case, services are rendered by the sub- consultant, the levy of Service Tax does not fall on the sub-consultant but only on the prime or main consulting engineer who raises a bill on his client (which would include the charges for services by the sub-consultant ). Q.5 What is the procedure to be followed when service charges for consulting engineers are received at different stages of work instead of as one time payment? Normally the consulting engineer receives remuneration from the client for the services rendered by him as per the stipulations in the contract/agreement between them. The payment from the client is received as a single payment or in different stages based on the completion of work at each stage. The consulting engineers shall be required to pay Service Tax on the payments received at each stage from the client by the 25 th of the succeeding month. Subsequent modification, if any, in the bills raised to the client at the time of final payment may be allowed after verification.

13 Q.6 Is any exemption from Service Tax available to consulting engineers? Yes. The value of taxable service rendered by a consulting engineer to a client in respect of any project based in a foreign country is fully exempt from the levy of Service Tax. However this exemption is subject to the condition that the charges for such services are received in convertible foreign exchange. - {Authority: Notification No.25/97-ST dt } Q.7 Are valuers liable for payment of service tax under the category of consulting engineer? Yes, the services provided by Engineer Valuers regarding valuation of immovable property and plant & machinery fall within the purview of Consulting Engineers and is liable for payment of service Tax. Q.8 Would the trust / societies providing service in the field on engineering consultancy, be liable to pay service tax? Yes, the Societies/ Trust working in the field of Engineering Consultancy would be liable to pay service tax under the category of consulting engineer. Q.9 Are the services rendered by Consulting Engineer to Central Govt./State Govt. organisations or Public Sector undertakings exempted from payment of Service Tax? No. There is no exemption to this effect. Such services would be as liable for payment of Service Tax as the services provided to private parties. Q.10 Are the Organisations functioning on behalf of the Govt. of India liable to pay Service Tax if they are engaged in rendering consultancy services on no profit, no loss basis? Yes. If Govt. organisations are providing consultancy services and getting paid for the same, they would be correctly covered under category of Consulting Engineer. Q.11 Whether a foreign company, which is not having registered office in India, but is providing services in India to Indian client, is liable to pay Service Tax? Yes, since the place of rendering the service is the criterion for deciding the liability to pay Service Tax, the foreign companies, which are providing engineering consultancy services in India, are liable to pay service tax after due registration. However, if they do not have any office in India, they can get registered at the head office of their client as their registered address for discharging their Service Tax liability. Q.12 If the foreign company is rendering services at different places all over India, is it necessary that different registrations be obtained for each place of operation or one registration is enough? No, even if they are rendering services at different places in the Country, they need to take registration only at the place where the Central billing office operates from. Q.13 If payment to the foreign company is in foreign currency, what would be rate of exchange to determine the Service Tax liability? The rate of exchange prevailing on the date on which Indian client makes payment, would be the rate of conversion of foreign currency into Indian rupees. Q.14 Is Service Tax applicable to those firms, who undertake turn-key projects?

14 If the firms are manufacturing tailor made items and are also engaged in drawing, designing, erection & commissioning of the machinery at site, all the essential ingredients of Consulting Engineers i.e. advice, consultancy & technical assistance are present. Therefore, they would be liable for payment of Service Tax. Q.15 Whether fees charged by a consulting engineer for secondment /deputation of qualified engineers would attract levy of Service Tax? Yes. Service Tax would be payable in the event consulting engineers are sent on deputation/secondment to other firms. Q.16 Are the services provided by a qualified engineer in the field of insurance survey liable to Service Tax under the category of consulting engineer? Yes. The services provided by a qualified engineer in the field of insurance survey would fall under service tax net under the category of service provided by consulting engineer. Q.17 In case of LPG road tanker, agencies authorised by the Director of Explosives, Nagpur conduct inspection and certify the tanker as road worthy. Such Inspections are not optional but compulsory (a statutory requirement). Whether the services rendered by such agencies will be covered under the scope of consulting Engineers? Services rendered by Agencies authorised by Director of Explosive, Nagpur to conduct inspection and certify road worthiness of LPG tanker attract service tax as Consulting Engineer since these services are in the nature of technical assistance provided by an engineering firm to a client. Q.18 Is any exemption from service tax available to consulting engineers working in the field of computer software? Yes. The value of taxable services provided to any person by a consulting engineer in relation to computer software is exempted from the whole of the service tax leviable thereon. (Authority :- Notfn. No.4/99-ST dt ) Clearing & Forwarding Agents Q.1 Who are clearing and forwarding agents? Clearing and forwarding agents are those who provide services relating to the clearing and forwarding operations and are engaged/appointed by manufacturer of goods (both excisable and non-excisable), producers and distributors of goods and also include such agents appointed for agricultural and mineral goods. Q.2 Who is the person responsible for payment of Service Tax in case of a clearing and forwarding agent? As in the case of all other services, the service providers are responsible for payment of Service Tax in respect of clearing and forwarding agents also. Earlier, it was directed that receivers of the service would be responsible for paying the Service Tax. The same has been held to be invalid by the Hon ble Supreme Court of India in the case of M/s.Laghu Udyog Bharati and Another Vs. Union of India {1999(89)ELT.247(SC)}. Finance Bill 2000 has sought to revalidate earlier position for limited period from to

15 Q.3 What are the types of services provided by clearing and forwarding agents which attract Service Tax? The levy of Service Tax will applies to services rendered by clearing and forwarding agents, who undertake, among other things, services of receipt, warehousing, despatch, record maintenance and account of goods on behalf of the principal who appoint or engage such agents. Normally, there would be a contract between the principal and the clearing and forwarding agent detailing the terms and conditions and also indicating the commission or remuneration to which the C&F agent is entitled. A clearing and forwarding agent normally undertakes the following activities on behalf of a principal: a. receiving the goods from the factories or premises of the principal or his agents; b. warehousing these goods; c. receiving despatch orders from the principal; d. arranging despatch of goods as per the directions of the principal by engaging transport on his own or through the authorised transporters of the principal; e. maintaining records of the receipt and despatch of goods and the stock available at the warehouse; Service Tax is payable in respect of the above services. Q.4 What is the taxable value of services provided by the clearing and forwarding agents? The Service Tax is computed on the gross amount of remuneration or commission paid to the clearing and forwarding agent by the principal engaging such agent. Under Service Tax Rules, it has been provided that the value of taxable service in relation to services rendered by clearing and forwarding agents to a client shall deemed to be the gross amount of remuneration or commission (by whatever name called) paid to such agent by the client engaging such agent. For the services rendered, the C & F agent receives commission or remuneration, which usually consists of two components: 1. minimum commission on a flat rate or turnover basis depending on the packages/consignments handled, and 2. a variable commission based on performance which is computed on the performance indicators agreed upon between the agent and the principal. The above two constitute the remuneration or commission paid to the C & F agent by the principal. Q.5 Is the facility of Centralised registration available to company having C&F services in various towns, states, or areas? Ans Yes. In cases where C&F agents engaged for various towns, states or areas are paid only by the regional or the head office of the company appointing such agents, for Service Tax purposes it would suffice to register only such regional or head offices. In such cases the regional office or the head office, as the case may be, should also be required to give an undertaking to discharge the Service Tax liability.

16 Q.6 Whether brokers, through whom factories/persons send their goods direct to the customers, could be covered under the expression C & F agents? Yes. If factories or persons are engaging brokers for sending their goods directly to their customers, on the basis of orders procured by them, services rendered by brokers would amount to services provided by a Clearing & Forwarding Agents and would be liable for payment of Service Tax. Q.7 Is the tax on service of C & F agents abolished? No, the service tax on C & F agents is not abolished but the manner of collection of the tax has changed. With effect from , the C & F agents themselves have to apply for registration and pay the Service Tax to the Govt. for services rendered to their clients. Q.8 What is the value of taxable services in case of turn-key contracts handled by the C & F agents? The value of taxable services rendered by a C & F agent is the gross amount charged by such agent from the clients for the services of Clearing & Forwarding operations in any manner. Further, the gross amount means the amount of commission or remuneration received for such services. Therefore, the remuneration received towards turn-key contracts would be chargeable on gross basis. Q.9 a. Whether the "Arhatiya" (commission agent) working in the mandies (such as vegetable mandi, food grain mandi and fruit mandi) who are providing the service with regard to selling the goods on behalf of agriculture producers and getting commission for the same will be covered under the definition of consignment agents or not? b. Whether consignment agents are included under the category of clearing & forwarding agents? Yes, consignment agents are included under the category of clearing & forwarding agent. The clearing & forwarding agent means any person who is engaged in providing any services either directly or indirectly, connected with the clearing and forwarding operation in any manner to any other persons and includes a consignment agent. Since the consignment agents provide service in respect of clearing & forwarding of a consignment, the services provided by them are chargeable to service tax as C & F agents. (Authority : S.65 (12) of Finance Act, 1994) Manpower Recruitment Agents Q.1 What is a " Manpower Recruitment Agency "? A "Manpower recruitment agency "is any commercial concern engaged in providing any service, directly or indirectly, in any manner for recruitment of manpower, to a client. Q.2 What is the Taxable Service in case of Man Power Recruitment Agency? The taxable service rendered by a manpower recruitment agency is any service provided to a client, by a manpower recruitment agency in relation to the recruitment of manpower in any

17 manner. The coverage of the term "manpower recruitment agency" is wide and includes within its ambit, the services provided by an agency from the primary stage of building a database of manpower for different categories of personnel employment, determining manpower requirement for the client, preliminary identification, short-listing and screening of prospective candidates, providing specialists for interviewing prospective candidates, arranging for their interviews at each stage; placing advertisements for recruitment of manpower in the print or electronic media, etc. In short, Service Tax on manpower recruitment agency covers within its fold, the entire gamut of services provided by a manpower recruitment agency to a client from the initial stage of selecting/identifying man-power required for any prospective employment, till the stage of actual selection for the same. Q.3 What is the value of Taxable Service in relation of ManPower Recruitment Agency? The value of taxable service in relation to service provided by a Manpower recruitment agency to a client is the gross amount charged by such agency from a client in relation to the recruitment of manpower in any manner. However, the expenses incurred by the manpower recruitment agency on behalf of the client which are reimbursed on actual basis are not includible in the value of taxable services. The manpower recruitment agency is required to substantiate such actual expenses on the basis of documentary evidence. In case the manpower recruitment agency is billing the client on the basis of a lump sum, any deductions from the same on account of reimbursable expenses, for the purposes of determining the value of taxable service may be permitted on the basis of documentary evidence adduced by the agency. Q.4 What is the procedure to be followed if the payment is received at different stages by the Manpower Recruitment Agency? Normally the manpower recruitment agency receives remuneration from the client for the services rendered by it as per the stipulations in the contract/agreement. The payment from the client is received at different stages, based on the completion of work/service at each stage. The manpower recruitment agency shall be required to pay Service Tax on the payments received at each stage from the client by the 25 th of the succeeding month. Subsequent modifications, if any, in the bills raised to the client at the time of final payment may be allowed after verification. Q.5 Whether the labour contractors, who supply their own labour on contract, would be covered under the definition of Manpower recruitment Agency? Ans No, since the labour contractors supply their own labour on contract, they do not help their client in recruitment of labour in any way. Therefore, the supply of labour on contract is not covered under the definition of Manpower recruitment Agency. Q.6 Whether trusts providing the services of Manpower Recruitment Agency are liable to pay the Service Tax? Law as it stands now, does not provide any exemption to trusts from payment of Service Tax. If they are getting paid for providing the service, they are liable for payment of Service Tax on the amount, which, they have received from their client and are to be treated as any

18 other service provider. Q.7 Do academic institutions, recruiting their students for industrial establishments on receipt of payment, come under the category of manpower recruitment agency? Yes, the institutions which are performing the tasks of commercial concern assisting in Man power Recruitment, fall within the scope of the definition of term Manpower Recruitment Agency and become liable to pay Service Tax. Air Travel Agents Q.1 Who is an Air Travel Agent? Air Travel Agent is a person engaged in providing any service connected with the booking of passage for travel by air. Q.2 What is taxable service for an air travel agent? In case of air travel agent, the taxable service is the service provided to the customer in relation to the booking of passage for travel by air. Q.3 What is the value of taxable service in case of air travel agent? In case of air travel agent, the value of taxable service is the gross amount charged by such agent from the customer for services in relation to the booking of passage for travel by air excluding the air fare but including the commission, if any received from airline in relation to such booking. The air travel agents receive certain commission for domestic tickets and for international tickets from the airlines. The details of the commissions payable by the airlines is indicated in the agency agreement entered into between the air line and the air travel agent. The travel agent files a fortnightly return to the airlines indicating the details of tickets booked, the fare collected, the commission earned along with other particulars. After adjusting the commission, he remits the balance amount to the air lines. This fortnightly return would be the basis for assessment of Service Tax in respect of air travel agents. However, an option has been given to the air travel agents to pay the Service Tax at the rate of 0.25% of the basic fare in the case of domestic tickets and 0.5% of the basic fare in the case of international tickets towards discharge of their Service Tax liability instead of paying tax at the rate of 5% on the actual commission received from the air lines. The basic fare is defined as that part of the fare on which commission is payable by the air lines. Q.4 What is the procedure to be followed for getting refund of Service tax in cases where the ticket booked is cancelled at a later stage? Ans Cancellation or modification of tickets is a common and frequent feature in air travel. The air travel agent in his fortnightly return gives the particulars of tickets cancelled or modified and adjusts the commission accordingly subject to final approval by the airlines. Since the commission is adjusted automatically and the Service Tax is paid on the net commission received, the question of separately claiming refund of Service Tax may not arise. Q.5 Is the service provided by Air Travel Agent in relation to the booking of passage for