DECLARED SERIVCESBy: Abhishek tak

oAll images are for representational purposes only. All images are property of and belong to their respective owners.

oPresentation has been prepared from a speaker’s point of view for ICAI national convention and thus it has not been described in detail.

o Law updated as per Finance Act, 2016o Suggestions for improvement may be mailed to

Disclaimer

abhishek.tak@icai.org

Introduced in 1994 with 3 services, namely:- Stock Brokers Service, General Insurance Service and Telephone Services. Than Expanded to 120 services.

Govt. brought an end to Selective Taxation Scheme and brought out Comprehensive Taxation Scheme (Negative List Regime)

Brought out definition of service in 2012.Goods and Service Tax (GST) in pipeline, soon to replace existing tax laws.

SERVICE TAX past and future

Talking point now daysKrishi kalyan cess

Levied on all taxable services @ 0.5% of the TOTAL VALVUE OF SERVICE.

This would be levied over and above the Service Tax and the Swachh Bharat Cess.

Applicable from 1st June 2016.The new cess in going to add an extra Rs.2/- Per

Rs.1000/- of the bill amount.

Service - MeaningEssential ingredients of the definition “service” as defined in Section 65B(44):o Activityo Carried out by a person for anothero Considerationo Includes a Declared Service

What is declared service? Activity carried out by one person to another for consideration. Must be specified in Section 66E of the Act.

Need of Declared Service Overlap of services. Validity of transactions. Clarity to individual services. Facilitate collection of revenue.

Nine activities have been specified in Sec.66E so far.As followings

1. Renting of Immovable Property

IMMOVABLE PROPERTY:Shall_include: land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to earth.”

RENTING means:With or without transfer of possession/control; allowing, permitting or granting access; or use such facility.Including letting, leasing, licensing or other similar arrangements in respect of immovable property.

Section 66E (a)

Negative list item: Renting/leasing vacant land, with or without a structure incidental to use for agriculture or agricultural use.Renting of residential dwelling for use as residence.Renting out property by RBI.Renting of any property by a Government or a Local Authority to a non-business entity.Exemptiono Renting of precincts of religious place.o Services by hotels etc. with declared tariff less than Rs. 1,000 or equivalent. Abatemento An abatement of 40% is provided in respect of renting of hotels i.e. 60% of value is liable for service tax.o No abatement for pandal and shamiana services. But if there exists a bundled service, (accommodation service with supply of eatables) then abatement at 30% allowed.

2. Construction & Works contractSection 66E(b) says construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion certificate by the competent authority.

Section 66E (h) says service portion in execution of works contract is a declared service.Works Contract means:-• A contract wherein transfer of property in goods involved in the execution of such contract, subject to tax as sale of goods.• Such contract is for purpose of carrying out construction, erection, installation, completion, repair and maintenance, alteration of movable or immovable property.

Exemptions vide notification no.25/2012-ST[for both Construction & Works Contract]o Construction/ Works Contract Services provided to the Government, Local Authority or a Governmental Authority w.r.t.

Historical monuments canal, dam, pipeline, water supply etc.o Construction etc. For use of General public

Road, Bridge, Pollution control plant, Structure for funeral, cremation

o Construction/Original work pertaining to infrastructure projects

Railways, single residential unit, Intermediate process of agri. produces

Particulars Abated Value

Taxable Value

(i)For residential unit having carpet area < 2000 sq.ft. AND where the amount charged is less than Rs. 1 crore;

75% 25%

(ii) For other than the (i) above 70% 30%

Abatement in respect of construction services- [Construction]

•Build operate transfer (BOT) model :First Level

•Government transfers right to use or develop the land to developer or builder (concessionaire) for a specific period. Developer/ builder will pay upfront lease amount or annual charges to Government.

Second Lev

el

•Builder or developer will begin development and construction on land given by Government. Since he works on his own, he is NOT a service provider and he remains owner of that structure for that specific period (concession period)

Third Level

•The concessionaire enters into agreement with several users for commercially exploiting the building developed/ constructed by him during lease period.

4. Intellectual property servicesAs per Section 66E(c) of Finance Act, 1994, ‘temporary transfer of or permitting the use or enjoyment of any intellectual property right is a declared service.’

Intellectual Property Right (IPR) includes copyright, patents, trademarks, design etc. Exemptions vide notification no.25/2012-STServices by way of temporary transfer or permitting the enjoyment of copyright-

Relating to original literary, dramatic, musical or artistic work; or

of cinematograph films for exhibition in a cinema theatre.POT:in respect of royalties and payments pertaining ©, TM etc. & consideration is not ascertainable at time of provision of service, PoT: each time when a payment in respect of such use , or an invoice is issued by SP, whichever is earlier ; [Rule-8 POT Rule 2011]

5. Information technology softwareAs per Section 66E(d) of the Finance Act, 1994, development, design, programming, customization, adaptation, upgradation, enhancement, implementation of information technology software is a declared service.

Aspects of IT software service:

› Sale of pre-packaged or canned software NO SERVICE TAX.› On-site development of software liable to service tax.› Licence to use pre-packaged software, liable to service tax.

6. Refraining actsAs per Section 66E(e) of the Finance Act, 1994, agreeing to the obligation:i. To refrain from an act, orii. To tolerate an act or a situation, oriii. To do an act,Has been specified as declared service.

7. Hiring & leasing of goodsAccording to Section 66E(f), ‘transfer of goods by way of hiring, leasing, licensing or any such manner without transfer of right to use such goods is a declared service.’

8. Delivery of Goods on Hire Purchase

Activities in relation to delivery of goods on HP or payment by instalments’ are declared service. [Section 66E (g)]

HP is a system/agreement where goods are let out on hire and under which hirer has option to purchase them and includes an agreement under which-

• Possession of goods is delivered against periodical instalments,

• The property is the goods is to pass to such person on the payment of last instalment and

• Such person has a right to terminate the agreement at any time before the property so passed. Abatement in relation to financial leasing services including Hire purchases @ 90% of interest.

9. Restaurants and cateringService portion in an activity wherein goods, being food or any other article of human consumption or any drink is supplied in any manner as a part of the activity is specified as declared service. [Section 66E (i)]Indoor catering

Outdoor catering

Exemptions notification 25/2012-ST:• Restaurants without air-conditioning or central air heating.• Catering meals including mid-day meals provided to educational institutions.• Services in air-conditioned/ central air-heating canteen of factory.

Service portion @40%

Service portion @60%

List

Email: abhishek.tak@icai.orgAbhishek TakCRO 0326345