Service Tax on 10 new services effective from 16-8-2002 — Clarifications - Service Tax - F. No. B11/1/2002-TRU

Service Tax on 10 new services effective from 16-8-2002 Clarifications F. No. B11/1/2002-TRU Dated 1-8-2002 Kindly refer to section 149 of the Finance Act, 2002 (20 of 2002) which, inter alia, provides for the levy of service tax on 10 new services. 2. It has been decided that the levy and collection of service tax on the new services shall be effective from 16-8-2002 (Vide Notification No. 8/2002-S.T., dated 1-8-2002). 3. As you are aware, certain legislative amendments were made in sections 73, 75, 78, 82, 83, 94 and 95 of the Finance Act, 1994 vide section 149 of the Finance Act, 2002. All these changes will now be effective from 16-8-2002. The Service Tax Rules, 1994 have also been amended. Notification No. 12/2002-S.T., dated 1-8-2002 has been issued in this regard. These amendments are also effective from 16-8-2002. 4. Legislative changes : The following changes were made in the Finance Act, 1994 by the Finance Act, 2002. 4.1 Section 73 has been amended to provide for relevant dates for computation of the period of limitation for issue of show cause notice for recovery of service tax in cases when return is filed, when no return is filed, when assessment is provisional and when any sum has erroneously been refunded. 4.2 Section 75 has been amended to provide for charging of interest at the rate of fifteen percent per annum (instead of the twenty four percent per annum) for delayed payment of service tax. 4.3 Section 78 has been amended to empower the Assistant Commissioner/Dy. Commissioner to impose penalty without prior approval of the Commissioner of Central Excise in cases where the value of taxable service suppressed/furnished does not exceed Rs. 2 lakh. Hitherto this limit was Rs. 25,000. 4.4 Section 82 has been amended to provide specifically for the power to seize documents relevant to any proceedings under the service tax law. 4.5 Section 83 has been amended to make section 11D of the Central Excise Act applicable to service tax. Accordingly, if any amount is recovered by any person as "service tax", then such person bound to pay it to the Government. The law provides for its recovery in case of his failure to do so. 4.6 Section 94 has been amended to empower the Government to make rules to allow credit of service tax paid on the services consumed for providing a taxable service in case where the services consumed and the service provided fall in the same category of taxable service. 4.7 Section 95 has been amended to empower the Government to remove the difficulties arising in implementation of service tax levy on new services by order in the official gazette within a period of two years from the date on which the levy on new service comes into effect. 5. Amendment in the definition of "banking and other financial services" and "banking services" : 5.1 The definition of "banking and other financial service" has been amended to extend the levy of service tax to body corporate other than those already specified earlier, providing specified services. The levy on body corporate, which have come into tax net as a consequence to this amendment, will be effective only from 16-8-2002. It may be noted that as a result of this amendment, all body corporate providing the specified "banking and other financial service" will come under the tax net. Earlier, it was clarified vide Ministry's instructions F. No. B-11/1/2001, dated 9-7-2001 that asset management companies are not NBFC. Hence they would not come under the purview of service tax. This instruction stands amended now as Asset Management Companies being "body corporate" will henceforth be liable to pay service tax. Similarly all merchant bankers, portfolio managers, foreign exchange brokers etc who are "body corporate" will henceforth be liable to pay service tax. 5.2 The definition of "banking company" has also been amended to assign it the meaning as given in clause (a) of section 45A of the Reserve Bank of India Act. This amendment has been made to clarify the doubts, which were raised about the applicability of service tax levy on banking and other financial services provided by the State Bank of India and its subsidiary banks under the erstwhile definition of "banking company". 6. Retrospective amendment in the provisions relating to "broadcasting service" : 6.1 Vide section 148(1) of the Finance Act 2002, the definitions of "broadcasting" and "taxable service" in relation to broadcasting service have been amended retrospectively with effect from 16-7-2001 in order to clarify the scope of service beyond doubt. Further a definition of "broadcasting agency or organisation" has been inserted with effect from 16-7-2001. It is now incorporated in the definition itself that in case of foreign broadcasting channels, broadcasting would include the activity of selling of time slots or obtaining sponsorship for broadcasting of any programme or collecting the broadcasting charges on behalf of such channel by its branch office or subsidiary or representative in India or any agent or any other person acting on their behalf. 6.2 Attention is invited to section 148(2) of the Finance Act. This has mandated that the broadcasting agencies, who did not pay service tax earlier, would have to pay all dues within thirty days from the date on which the Finance Bill, 2002 received the assent of the President (i.e. 11-5-2002), otherwise they will have to pay dues along with the interest. The Commissioner would have no doubt taken the necessary action accordingly. If any recoveries are still pending, the same may kindly be brought to the notice of the Ministry by the Commissioner concerned within a fortnight. 7. Service Tax Credit Rules, 2002 : 7.1 The Service Tax Credit Rules, 2002 have been made to allow credit within the same category of service. These rules also specifies the procedural requirement to be fulfilled for availing credit of service tax. Notification No. 14/2002-ST refers. These rules broadly envisage the following procedures/conditions for availing credit. (i) "input service" and "output service" service should fall in the same category of service i.e. they should fall in the same sub-clause of clause 90 of section 65 of the Finance Act, 1994. (ii) credit will be available only in respect of such "input service" for which the bill/invoice is issued on or after 16-8-2002. (iii) credit can be availed on invoice/challan/bill issued by the input service provider indicating clearly the serial number, the registration no., address of the service provider, value of taxable service and amount service tax payable/paid. For instance, credit of service tax will be available to a consulting engineer in respect of the service provided to him by another consulting engineer. To give another illustration, an event manager cannot claim credit of the service tax paid by a videographer. (iv) the person availing credit shall be responsible to ensure the correctness of credit availed and he shall maintain proper accounting records in this regard indicating the details of description and value of input service, service tax paid on input service, the details of service provider with service tax registration number and the service tax credit utilized for payment of service tax on final service. (v) he shall submit information in prescribed proforma to the jurisdictional officer along with ST-3 return. (vi) in case of wrong availment of credit or cases where it is discovered later on that service tax has not been paid, service tax credit will be recoverable and penal provisions of sections 73, 75, 76 and 78 would be applicable. For instance, a service provider issued a bill for a service rendered. He also shows the ST amount payable. However, in the actual term, he did not pay this to the Government for any reason, whatsoever. In that event the output service provider will have to reverse the credit. He cannot take this plea that the credit is due to him as he was not at fault. 8. Amendments in Service Tax Rules, 1994 : 8.1 In relation to "insurance auxiliary services relating to life insurance" provided by the insurance agents, it has been prescribed that the service tax shall be paid by the Insurance Company (Insurer). Notification No. 12/2002-ST refers. Accordingly in case of insurance agents, service tax in respect of their services will have to be paid by the life insurance companies. 8.2 As per the provisions existing hitherto, in the case of a service provider who is a non resident or from outside India and does not have an office in India the service tax has to be paid either by such service provider or by a person authorized by him. However, it is reported that difficulties arise in collecting service tax from such service provider as they leave the country after rendering the service. To smoothen the tax collection, it has now been prescribed in the Service Tax Rules that in such cases the service receiver in India would be liable to pay service tax on behalf of the service provider (refer Notification No. 12/2002-S.T.). 8.3 On delay in payment of service tax, penalty and interest is chargeable. As regards the issue as to which date should be deemed to be the date of payment of service tax, there are divergent views. In some cases the date on which the service tax is credited to the Government account is being treated as the date on which service tax has been paid. Even though the assessee deposits cheque on or before the stipulated date, the Government account is credited after a few days of deposit of cheque. It has now been decided that the date of presentation of cheque will deemed to be the date on which service tax has been paid to the credit of the Central Government provided the cheque is not dishonoured in the course of clearing Notification No. 12/2002-S.T. refers. 8.4 Amendment in Form ST-3: Certain amendments have been made in the ST-3 form in view of introduction of credit within the same service. Notification No. 12/2002- ST refers. 9. Presently, practising chartered accountants, cost accountants and company secretaries are liable to pay service tax on the specified services provided in their professional capacity as mentioned in the Notification No. 59/98-S.T., dated 16-10-98. However this exemption has been misinterpreted to mean that even if a CA/CS/Cost Accountants provides other taxable services such as management consultancy, or manpower recruitment service, he is not liable to pay service tax. This is not the correct interpretation. To clarify all doubts, an Explanation has been added in the Notification No. 59/98-S.T., dated 16-10-98. This Explanation makes it clear that in case a CA/CS/Cost Accountants provides other taxable services, service tax will have to be paid as such taxable service (Notification No. 15 /2002-ST refers). 10. Notification No. 6/99-S.T., dated 9-4-1999 exempts the service tax on such taxable services where payment is received in India in foreign convertible currency. While referring to taxable services, this notification has a reference to clause (72) of section 65 of the Finance Act, 1994. Consequent to amendment made in section 65 vide the Finance Act, 2002, the taxable service are now defined in clause (90). The Notification No. 6/99-S.T., dated 9-4-1999 has been amended to incorporate reference to clause (90) in place of existing reference to clause (72) (Notification No. 13/2002-S.T. refers) 11. Extension of service tax to ten more services : In regard to the new services, which will be subject to service tax from the 16th July, 2002, certain issues have been brought to notice during the course of discussion with the departmental officials or the concerned Associations. These have been discussed and clarified in the Annexures appended as per details below. (i) Life insurance, including insurance auxiliary service relating to life insurance. (Annexure I) (ii) Cargo handling service (Annexure II) (iii) Storage and warehousing services (Annexure III) (iv) Event Management (Annexure IV) (v) Rail Travel Agent (Annexure V) (vi) Health club fitness centres (Annexure VI) (vii) Beauty parlours (Annerure VII) (viii) Fashion Designers (Annexure VIII) (ix) Cable Operators (Annexure IX) (x) Dry cleaning service (Annexure X) The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to sub-clause or clause means clause or sub-clause of section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002. 11.1 The new assessee are required to file for service tax registration No. in form ST-1 to the jurisdictional Superintendent within thirty days from 16-8-2002. The ST-1 form is enclosed herewith (Annexure XI). In case of failure to take registration within the stipulated time of thirty days, the assessee would be liable to pay a mandatory penalty of five hundred rupees. 12. The Commissioners are requested to issue suitable trade notices for the benefit of the new assessees detailing the scope and coverage of the new services, gist of the service tax procedures and formalities to be complied with by the assessees, formats of the application form for registration, service tax returns, etc., the manner of payment of service tax, the banks through which service tax payments can be made and other relevant aspects. 13. In case of any doubts or difficulties arising in the implementation of service tax on the new services, which require clarification at the Board's level, the Commissioners are requested to bring the same to the notice of the undersigned immediately along with their suggestions/views for resolving these difficulties. Annexure I Life insurance including insurance auxiliary service relating to life insurance 1. The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to sub-clause or clause means clause or sub-clause of section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002. 2. Clause (51) defines "life insurance business" as to have meaning assigned to it in clause (11) of section 2 of the Insurance Act, 1938. The taxable service has been defined in clause 90(zx) of section 65 as "any service provided, to a policy holder, by a insurer carrying on life insurance business, in relation to life insurance business". 3. Definition of "life insurance business" as per the aforesaid section of the Insurance Act, 1938 is as follows : "Life insurance business" means the business of effecting contracts of insurance upon human life, including and contract whereby the payment of money is assured on death (except death by accident only) or the happening of any contingency dependent on human life, and any contract which is subject to payment of premiums for a term dependent on human life and shall be deemed to include - (a) the granting of disability and double or triple indemnity accident benefit, if so provided in the contract of insurance, (b) the granting of annuities upon human life, and (c) the granting of superannuation allowances and annuity payable out of any fund applicable solely to the relief and maintenance of person engaged in any particular profession, trade or employment or of the dependent of such person. 4. It has been decided to exempt the service tax leviable on life insurance service (refer to Notification No. 9/2002-S.T., dated 1-8-2002). As a result, service tax is not payable on the service provided by an insurer to a policy holder in relation to life insurance business. 5. Insurance auxiliary services relating to general insurance business were brought into tax net last year with effect from 16-7-2001. This levy has now been extended to cover the insurance auxiliary service relating to life insurance also. 5.1 Services covered in this category are the services provided by the insurance agents to the insurer/policy holder, by actuary to the insurer or by an intermediary or insurance intermediary to insurer/policy holders. Insurance agents provide service to insurance company in relation to marketing of insurance policies. They also provide service to the policy holder by providing information/advice on the types of insurance policies, processing of documentation, remitting of insurance premium, etc. Actuarial services are provided by the actuaries to the insurance companies. They cover diverse fields such as calculating insurance risks and premia, insurance claims adjustment services such as services of investigating claims, determining the amount of loss or damages covered by the insurance policies and negotiating settlements, services of examining claims which have been investigated and authorisation of payments and damage assessment services, administration of insurance including salvage administration and insurance consultancy services. 5.2 The service providers in this category includes insurance agents, insurance surveyors and loss adjusters, actuaries insurance consultants and insurance brokers. In the case of insurance surveyors and loss adjusters, actuaries and insurance consultants, the service is provided mainly to the insurance companies (insurer) while in the case of insurance agents, the service is provided to both the insurer and the policy holder. Service tax is liable to be paid by the insurance auxiliary service provider except in case of insurance agents. Insurance agents normally do not charge the policy holder. However, the insurance company pays the agent a commission (usually as a percentage of the insurance premium) on a periodic basis. As is the case in respect of general insurance business, it has been provided in the Service Tax Rules that in the case of an insurance agent for life insurance, the person liable to pay service tax will be the concerned insurance company who has appointed the agent. Notification No. 12/2002-S.T. refers. 6. The service tax is applicable to services provided on or after 16-8-2002 and any payment made for the services provided prior to this date will not liable to tax even though payment is made on or after the 16-8-2002. Annexure II Cargo handling service 1. The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to sub-clause or clause means clause or sub-clause of section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002. 2. As per clause (21), the term "cargo handling service" means loading, unloading, packing or unpacking of cargo and includes cargo handling services provided for freight in special containers or for non-containerised freight, services provided by a container freight terminal or any other freight terminal, for all modes of transport, and any other service incidental to freight, but does not include handling of export cargo or passenger baggage or mere transportation of cargo. The taxable service, as per sub-clause (zr) of clause (90), is any service provided, to any person, by a cargo handling agency in relation to cargo handling services. 3. The services which are liable to tax under this category are the services provided by cargo handling agencies who undertake the activity of packing, unpacking, loading and unloading of goods meant to be transported by any means of transportation namely truck, rail, ship or aircraft. Well known examples of cargo handling service are services provided in relation to cargo handling by the Container Corporation of India, Airport Authority of India, Inland Container Depot, Container Freight Stations. This is only an illustrative list. There are several other firms that are engaged in the business of cargo handling services. 3.1 The services provided in relation to export cargo and passenger baggage are excluded from tax net. 3.2 Mere transportation of goods is not covered in the category of cargo handling and is therefore not liable to service tax. 3.3 Cargo handling service provided in relation to storage of agricultural produce (scope of the term "agricultural produce" is given under the storage and warehousing service) or for goods meant to be stored in cold storage have been exempted from the levy of service tax. (See Notification No. 10/2002-S.T.). 4. A point has been raised as to what would be the value of service tax in a case where transport and cargo handling service is provided in a composite manner. The measure of tax is the gross amount charged by the cargo handling agency from the customer. Therefore, if lumpsum amount is charged for both transportation and cargo handling, the tax will be payable on the entire amount. On the other hand, if the bill indicates the amount charged for cargo handling and transportation separately on actuals basis (verifiable by documentary evidence), then the tax would be leviable only on the cargo handling charges. 5. Cargo handling services are provided in the port also. Whether such service will be covered in the category of port services or cargo handling service. In this context it may be mentioned that port services cover any service provided in relation to goods or vessels by a port or a person authorized by the port. This includes the cargo handling service provided within the port premises. Therefore to this extent there may be an overlap in cargo handling service and the port service. However since port services covers all the service in relation to goods and vessels and therefore more specific to port, the service provided in a port in relation to handling of goods would be appropriately covered under port service and no separate levy will be attracted under the category of cargo handling agency service. Similar would be the case in respect of service provided for storage of goods in the port premises. 6. All goods meant for export are excluded from the scope of this levy. There may be cases where goods may be transhipped at a place other than the place of packing before reaching a place from where it is exported. For example goods are packed say at Agra for transportation to Bhopal where it is transhipped and ultimately reaches Mumbai, from where it is exported. A doubt has been raised as to whether service tax would be leviable on cargo handling service at Agra. It is clarified service provided in relation to any cargo which is meant for export, would not be taxable irrespective of the fact that it reaches the place of export after transhipment. However, the relevant documents should show that the Goods are for export. 7. Passenger baggage has been excluded from the levy of service tax. In this regard a point has been raised as to whether unaccompanied baggage of a passenger attracts service tax under the category of passenger baggage. It is clarified that unaccompanied baggage of a passenger will not be leviable to service tax. 8. A point has been raised by Airports Authority of India (AAI) as to whether service tax will be leviable in respect of handling of transhipment of export cargo from one international carrier to another international carrier or from a domestic carrier to an international carrier. It is clarified that so long as the cargo is for export, no service tax on handling of such cargo is leviable. For domestic cargo service tax will be applicable. 9. Another point raised by them is that they undertake transhipment of import cargo from international to domestic carrier which will be ultimately cleared at the final domestic destination. It is stated that the service rendered by them should be held as exempted and it merely relates to transportation of goods. This is not factually correct. Under the Notification No. Cargo/13519/Pt. I, dated the 4th June, 1993, issued under the International Airports Authority Act, 1973, the AAI can levy charges towards demurrage, handling charges, special charges for live animals, hazardous cargo, radio-active cargo and cargo requiring strong room facilities, storage and processing charges, terminal charges. They are not supposed to levy any transportation charges. Therefore whatever charges they levy in this regard would be only towards handling charges and accordingly, service tax would be leviable. 10. It has been pointed out that Container Freight Stations that they do not have any direct contact with the importer and they only provide facility to the Customs House Agents (CHA) to handle the container and import cargo for which they have a contract on a mutually agreed rate. It is the CHA who claims all the charges from the importer including the charges made by the CFS on CHA and remit to the CFS. Since services of a CHA is already covered under the tax net, the CFS service providers should be exempt from tax when the billing is done on CHAs; otherwise there will be double taxation. The above contention is not correct. In the case of CHAs, the service tax is levied only on the agency or agency and attendance charges and not on the reimbursible expenses (on actuals basis) such as port fees, statutory levies, landing and container charges, dock fees, examination charges, terminal handling charges, etc. The CHA does not pay service tax on the handling charges charged by the CFS. Thus there is no double taxation. Further, as per the law, whatever charges, the cargo handling agency charges from any person (including the CHA) is liable to service tax. 11. Another point raised relates to cases where the CFS offers a total package rate, which includes transportation and handling in respect of imported laden containers from Port to CFS. The question is if the cost of transportation is shown separately in the bill raised, will it be excluded from the levy of service tax. If the cost of transportation is claimed on actuals basis, then it will not be includible in the taxable value of cargo handling services. 12. A clarification has been sought as to whether service tax is payable on abandoned cargo which are auctioned by the CFS as no service is rendered to any person. In the case of auctioned goods, the proceeds of the auction goes first to the cost of auction, then towards customs duties and then to the custodian of the goods. It is clarified that no cargo handling service can be said to have been rendered in such cases, therefore service tax is not leviable. 13. Some of the cargo handling agencies may also act as marketing agents for individual airlines for which they get a commission, which seems to range from 5% to 15% of the freight. The question is whether service tax is payable on this. Marketing or canvassing for cargo for airlines does not come within the ambit of cargo handling services. Hence no service tax is payable under the category of cargo handling service. 14. CFSs also sometimes undertake storing/washing/repairing and handling of empty containers for the shipping lines for which they charge the shipping lines. Empty containers cannot be treated as cargo. Therefore, the activities mentioned above do not come within the purview of cargo handling services. 15. Another doubt raised in relation to cargo handling services is that whether individuals undertaking the activity of loading or unloading of cargo would be leviable to service tax. For example, if someone hires labour/labourer for loading or unloading of goods in their individual capacity, whether he would be liable to service tax as a cargo handling agency. It is clarified that such activities will not come under the purview of service tax as a cargo handling agency. Annexure III Storage and warehousing services 1. The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to sub-clause or clause means clause or sub-clause of section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002. 2. As per clause (87), "storage and warehousing" includes storage and warehousing services for goods including liquids and gases but does not include any service provided for storage of agricultural produce or any service provided by a cold storage. As per sub-clause (zza) of clause (90), the taxable service is any service provided, to any person, by a storage or warehouse keeper in relation to storage and warehousing of goods. 3. Storage and warehousing service for all kinds of goods are provided by public warehouses, private warehouses, by agencies such as the Central Ware Housing Corporation, Air Port Authorities, Railways, Inland Container Depots, Container Freight Stations, storage godown and tankers operated by private individuals etc. The storage and warehousing service provider normally make arrangement for space to keep the goods, loading, unloading and stacking of goods in the storage area, keeps inventory of goods, makes security arrangements and provide insurance cover etc. Service provided in ports has already been covered under the category of port service. 4. Service provided in relation to agriculture produce and service provided by cold storage is outside the ambit of the levy. Doubts have been raised about the scope of term "agricultural produce". In order to clarify the scope of this term beyond doubts, an order has been issued under the power vested under section 95 of the Finance Act (see Order No. 1/2002-S.T., dated 1-8-2002). As clarified in the order, the term agricultural produce would cover all cereals, pulses, fruits, nuts and vegetables, spices, copra, sugar cane, jaggery, raw vegetable fibres such as cotton, flax, jute etc., indigo, unmanufactured tobacco, betel leaves, tendu leaves, and similar products. However, manufactured products such as sugar, edible oils, processed food etc. will not come under the purview of the term 'agricultural produce'. 5. It has been stated that in some case a storage owner only rents the storage premises. He does not provide any service such as loading/unloading, stacking, security etc. A point has been raised as to whether service tax would be leviable in such cases. It is clarified that mere renting of space cannot be said to be in the nature of service provided for storage or warehousing of goods. Essential test is whether the storage keeper provides for security of goods, stacking, loading/unloading of goods in the storage area. 6. A point has been raised by the Airport Authority of India (AAI) that they have established cold storage for perishable goods at cargo complexes at various places as part of cargo warehousing activities and whether the exemption provided in respect of cold storage would be applicable to these cold storages also. It is clarified that service provided by a cold storage has been specifically excluded from the tax net. Therefore the service of cold storage provided by AAI will also be exempt. 7. Another point raised is that AAI are collecting terminal charges which is only a facilitation charge for providing a terminal and as such does not involve any service. As per the Notification No. Cargo/ 13519/Pt. I, dated 4-6-1993 of the International Airport Authority of India "terminal charges" means charges payable to or collected by the Authority or Cargo Handling Agency for use of facilities for processing of cargo. As per this notification "storage and processing charges" specifically include terminal charges also. Therefore service tax is leviable on such charges. 8. A doubt has been raised whether cloak room services for passenger's luggage in railway stations, bus stations etc. would come within the purview of storage and warehousing services. It is clarified that these are passenger terminal services incidental to rail transport or road transport, they do not come within the purview of storage and warehousing services. 9. The Central Warehousing Corporation has stated that they have more than 450 warehouses which are controlled by 17 regional offices. The billing is done both at the warehouse level and at the Regional Office level. However accounting for the warehousing charges as well as the cargo handling services is done only at the Regional Office level. Therefore, they have requested that only their Regional Offices should be registered for service tax purposes. The Service Tax rules empower the Commissioner of Central Excise to register only those offices which have centralised accounting facility. The Commissioners may exercise this power in such cases and register only the regional offices of CWC. 10. Another point made by the CWC is that they engage handling and transport contractors (H T contractors) to provide handling and transport services who would be charging them service tax for cargo handling services. CWC add supervision charges and raises the bill to the customers. For warehousing they raise a separate bill. The question is whether CWC is liable to pay service tax on cargo handling services and if so, whether they can take credit of the tax paid on cargo handling services by the H T contractor. Similar situations may exist in respect of other storage and warehouse keepers. It is clarified that if the storage and warehouse keeper undertakes cargo handling services also and raises its own bill to the customer for such service, then he would be liable to pay service tax under the category of cargo handling services also. However, he would be eligible to take credit of service tax paid on cargo handling services rendered by the H T contractors and adjust the same against his service tax liability on cargo handling services provided he raises a separate bill for the same to his client. In other words, he cannot adjust the credit against storage and warehousing service charges. Annexure IV Event management service 1. The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to sub-clause or clause means clause or sub-clause of section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002. 2. As per clause (34), "event management" means any service provided in relation to planning, promotion, organising or presentation of any arts, entertainment, business, sports or any other event and includes any consultation provided in this regard. Vide clause (90)(zu), taxable service means any service provided to a client, by an event manager in relation to event management. Event manager has been defined in clause (35) as any person who is engaged in providing any service in relation to event management in any manner. 3. An event manager is hired to execute an event such as product launch of any corporate, promotional activities, concerts/ rock show, official meets, award functions, beauty pageants, entertainment events, exhibitions, private functions, and sports events etc. Event manager uses his expertise and ideas to manage an event. Event manager is supposed to manage a venue, sets including decoration of sets, mandap, chair, table, barricades, sound, light video, electricals, security, communication, invitations to the event/ sale of tickets and publicity of the event. He has also to manage the stage show, artist, musician, choreographers and other miscellaneous items for holding of event. All services provided by the event manager are liable to service tax. This also covers any consultation provided for organizing an event. 4. For managing an event, the event manager hires the services of photographer, videographer, sound recording studio, advertising agency, mandap keeper and security agency. Service tax is already leviable on the amount paid to these agencies by the event manager. A point has been raised as to whether the amount paid by the event manager to such agencies will be includible in the value on which he is liable to pay service tax. It is clarified that the taxable service is any service provided by the event manager in relation to management of event. Therefore the gross amount charged by the event manager from the client for organizing the event is liable to be included in the value of the taxable service for the purpose of calculation of service tax. 5. A point has been raised as to whether in the case where event is organized/managed in-house but certain contractors are appointed say for stage/mandap preparation, for lighting/sound system, for advertising the event etc. and revenue is generated by renting out the exhibition space and sale of ticket, whether service tax will be leviable on the amount charged by the contractors or on the amount generated by sale of space or tickets etc. It is clarified that service tax is not on the event but on the service provided for managing an event. Therefore in a case where the event is organized/managed by the sponsor himself, no service tax is payable as "event management". However, the contractors who provide service as mandap keeper, videographer, security agency etc. are no doubt liable to pay service tax on their " taxable service". It is clarified that service tax under the category of event management is not leviable on the sale proceeds of tickets or revenue generated from the sale of space. Annexure V Rail Travel agent 1. The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to sub-clause or clause means clause or sub-clause of section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002. 2. As per clause (72), "rail travel agent" means any person engaged in providing any service connected with booking of passage for travel by rail. The taxable service is any service provided to a customer, by a rail travel agent in relation to booking of passage for travel by rail. 3. As per section 67, the value of taxable service includes the commission or any amount received by the rail travel agent from the Railways or the customer but does not include the rail fare collected by the rail travel agent. 4. A point has been raised as to whether the service tax is leviable on rail travel agent not registered with railways. It is clarified that any person whether registered with the Railways or not engaged in providing any service connected with booking of passage for travel by rail is liable to service tax. 5. Rail travel agent charges the customer, generally on per ticket/berth basis. Further, cancellation of tickets is also quite frequent and rail travel agent also charges the customer for cancellation of tickets. Service tax is payable in both the cases. Annexure VI Health club and fitness centers service 1. The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to sub-clause or clause means clause or sub-clause of section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002. 2. As per clause (42), "health and fitness service" means physical well being service such as, sauna and steam bath, turkish bath, solarium, spas, reducing or slimming salons, gymnasium, yoga, meditation, massage (excluding therapeutic massage) or any other like service. As per clause (90)(zw), the taxable service is any service provided to any person, by a health club and fitness centre in relation to health and fitness service. "Health club and fitness centre" means any establishment including a hotel or a resort providing health and fitness service. 3. Health and fitness services are provided by clubs, fitness centers, health saloons, hotels, gymnasium and massage centers. The services which fall under this category might be for weight reduction and slimming, physical fitness exercise, gyms, aerobics, yoga, meditation, reiki, sauna and steam bath, Turkish bath, sun bath and massage for general well being. However therapeutic massage does not come in the ambit of taxable service. Therapeutic massage basically means a massage provided by qualified professionals under medical supervision for curing diseases such as arthritis, chronic low back pain and sciatica etc. Ayurvedic massages, acupressure therapy, etc. given by qualified professionals under medical supervision for curing diseases/disorders will come under the category of therapeutic massages. If the massage is performed without any medical supervision or advice but for the general physical well being of a person, such massages do not come under the purview of therapeutic massages and they would be liable to service tax. 4. A point has been raised as to what would be the value of taxable service in case where clubs and fitness centers charge a monthly/periodic amount as membership fee and only members are allowed to avail their services. It is clarified that membership fee charged by the club is in lieu of service provided and therefore in such cases service tax would be leviable on periodic/monthly membership fee. 5. Another point relates to service tax on membership fee already collected. It is clarified that no service tax will be payable on membership fee already collected prior to the date on which the new service tax has come into force. 6. Certain recognized institutes impart diploma courses in yoga. A point has been raised as to whether service tax is leviable on such institutes. It is clarified that such institutes and research center do not fall in the category of health club and fitness center and accordingly would not be liable to service tax. Annexure VII Beauty parlours 1. The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to sub-clause or clause means clause or sub-clause of section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002. 2. As per clause (16), "beauty treatment" includes face and beauty treatment, cosmetic treatment, manicure, pedicure or counseling services on beauty, face care or make-up and as per clause (17), "beauty parlour" means any establishment providing beauty treatment services. The taxable service, as per sub-clause (zq) of clause (90) means any service provided, to a customer, by a beauty parlour in relation to beauty treatment. 3. This service covers the beauty treatments such as facial, manicure, pedicure and other make ups provided by beauty parlours. However, it does not include hair cutting and shaving. Further, it does not include plastic surgery/ cosmetics surgery done to improve the appearance, as they are not the kind of service provided by the beauty parlours. These are more appropriately classifiable as medical services. 3.1 The service provided in relation to hair dyeing has been exempted vide Notification No. 11/2002-ST, dated 1-8-2002. 4. For providing beauty services, parlours use materials such as cosmetics and toilet preparations. A point has been raised as to whether the cost of such materials will be included in the value of taxable service. It is clarified that these materials are essential for providing the service and they are not sold as such but used for treatment such as facials etc. Therefore, they are integral to the service provided. Hence service tax will be charged on the gross amount and no abatement is admissible on account of the value of material consumed in providing the service. 5. Often beauty parlours also sell cosmetics in retail. Quite obviously, no service tax is payable on mere sale of cosmetics or any other material. Annexure VIII Fashion designer services 1. The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to sub-clause or clause means clause or sub-clause of section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002. 2. As per clause (37) "fashion designing" includes any activity relating to conceptualising, outlining, creating the designs and preparing patterns for costumes, apparels, garments, clothing accessories, jewellery or any other articles intended to be worn by human beings and any other service incidental thereto and as per clause (38) "fashion designer" means any person engaged in providing service in relation to fashion designing. As per sub-clause (zv) of clause (90), taxable service is any service provided to any person, by a fashion designer in relation to fashion designing. 3. Fashion designer conceptualise and create designs/patterns applying his sense of aesthetic, keen sense of colour, visual imagination, knowledge of market trend and as per requirement of the client. Accordingly fashion designer may be involved in designing of any goods which are intended to be worn by human being and where aesthetic/looks/fashion is a criterion for wearing it. Fashion designers work include selection of material (for example type of cloth, its colour, design, quantity etc.), preparing design as per the trend or as per his visual imagination, preparation of pattern incorporating the requirement of the client. Fashion designer also keeps in mind the occasion, season and time etc. when his designed article is intended to be worn. 4. A point has been raised as to whether tailors and jewellers will be covered under the service tax. Taxable service in this case is designing of goods intended to be worn by human being. A tailor is involved only in stitching of clothes. As such no designing activity is involved. Hence tailor will not be covered under the tax net. Similarly jeweller essentially makes jewellery and sells it. Therefore, no designing is involved. However a jeweller may avail services of a designer to design jewellery. Service provided by designer to jeweller would be covered under the tax net in the category of fashion designing. 5. Some times the fashion designer not only provide designing service but also make the garments or the intended articles as per the requirement. A point has been raised as to what shall be the value of taxable service in such cases as the service provider charges in composite manner for designing as well as making of garments. It is clarified that service tax levy covers only the fashion designing service and as such making of garments is outside the purview of the levy. Therefore service tax would be leviable only on the designing charges provided fashion designer show the designing and making charges separately in the bill. However it is also clarified that if a fashion designers designs article for himself and makes these articles say garments and sells them, in such a case designing service is provided to oneself by the designer and therefore not liable to service tax. 6. At times fashion designer provides stitching service along with designing of cloth as per the requirement of client. In such case the fashion designer is liable to pay service tax only on designing service rendered by him provided designing charges are shown separately in the bill. However if designing charges and stitching charges are shown in consolidated manner, service tax will be leviable on entire amount. Annexure IX Cable operators 1. The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to sub-clause or clause means clause or sub-clause of section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002. 2. As per clause (20), "cable service" shall have the meaning assigned to it in clause (b) of section 2 of the Cable Television Networks (Regulation) Act, 1995. As per clause (19) "cable operator" shall have the meaning assigned to it in clause (a) of section 2 of the Cable Television Networks (Regulation) Act, 1995. The taxable service, as per sub-clause (zs) of clause (90) is any service provided to a customer, by a cable operator in relation to cable services. 3. As per the Cable Television Network (Regulation) Act, 1995, the definitions of cable service and cable operator are as follows : "cable operator" means any person who provides, cable service through a cable television network or otherwise controls or is responsible for the management and operation of a cable television network; "cable service" means the transmission by cables of programmes including re-transmission by cables of any broadcast television signals; 4. The taxable service in this case is the cable services provided by the cable operators. The programme broadcast by television channel are received either by Multi System Operators (MSO) or directly by cable operators in the form of signals. Where MSO receives the signals, they first retransmit signals to the cable operator who in turn retransmits the same to the viewers through the cable network provided by the cable operator. Service tax is liable to be paid by the cable operator providing service to ultimate subscriber of cable services. 5. In some States, cable operators are also liable to pay entertainment tax. In such cases, a cable operator charges from his customer an amount inclusive of entertainment tax. A point has been raised as to whether the amount paid as entertainment tax is liable to be included in the value of taxable service. It is clarified that the entertainment tax collected and paid to the Government will not be includible in the value of taxable service, provided the cable operator clearly indicates the entertainment tax element in his bill to the customer. Annexure X Dry cleaning service 1. The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to sub-clause or clause means clause or sub-clause of section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002. 2. As per clause (31), "dry cleaning" includes dry cleaning of apparels, garments or other textile, fur or leather articles. As per clause (32) "dry cleaner" means any commercial concern providing service in relation to dry cleaning. The taxable service, as per clause (90)(zt) is any service provided to a customer, by a dry cleaner in relation to dry cleaning. 3. Dry cleaner normally performs following process as on cloths during the process of dry cleaning : (i) Tagging and inspection : Dry cleaner inspects the cloths and tags them with an identification label. (ii) Pre-treatment : a stain remover is applied to remove the stains. Use of stain remover depends on the nature of stains such as stains of grease, oil, ink, colours etc. Fabric/cloth is then rinsed and dried. (iii) Dry cleaning : a dry cleaning machine is a motor driven washer/extractor/dryer and it holds clothes in a rotating, perforated stainless-steel basket. Cloths are washed with a solvent. There may be various types of solvents used for dry cleaning such as perchloroethylene (perc), carbon tetrachloride, trichloroethylene and petrol etc. As the clothes rotate in the perforated basket, there is a constant flow of clean solvent from the pump and filter system. After cleaning, the clothes are drained to expel the solvent and then goes into a dry cycle by circulating warm air. (iv) Post spotting : If there is any spot/stain left after the dry cleaning, it is removed using water or any other appropriate chemical. 4. A point has been raised as to whether service tax is leviable on wet cleaning also. Wet cleaning is a process of cleaning garments in water and water soluble detergent. It is clarified that service tax is leviable only on dry cleaning. Accordingly service tax is not leviable on wet cleaning/washing provided the dry cleaner clearly mentions it in the bill. If details are not mentioned in the bill, it would normally be understood that clothes have been dry cleaned and in such situation service tax is liable to be paid. 5. A point has been raised whether service tax is payable on the job of dyeing, darning etc. It is clarified that since these activities are not dry cleaning, these service are not taxable provided it is clearly indicated in the bill.