Applicability of service tax on fee collected by Public Authorities while performing statutory functions /duties under the provisions of a law – regarding - Service Tax - 89/7/2006

Applicability of service tax on fee collected by Public Authorities while performing statutory functions /duties under the provisions of a law - regarding Circular No. 89 / 7 /2006- Service Tax New Delhi, the 18 th December, 2006 F.No. 255/1/2006-CX.4 Government of India Ministry of Finance Department of Revenue (Central Board of Excise and Customs) To Chief Commissioners of Central Excise (All) Chief Commissioners of Customs Central Excise (All) Commissioners of Service Tax (All) Director General of Service Tax, Mumbai Director General, Central Excise Intelligence, New Delhi Subject: Applicability of service tax on fee collected by Public Authorities while performing statutory functions /duties under the provisions of a law - regarding Sir/Madam, A number of sovereign/public authorities (i.e. an agency constituted/set up by government) perform certain functions/ duties, which are statutory in nature. These functions are performed in terms of specific responsibility assigned to them under the law in force. For examples, the Regional Reference Standards Laboratories (RRSL) undertake verification, approval and calibration of weighing and measuring instruments; the Regional Transport Officer (RTO) issues fitness certificate to the vehicles; the Directorate of Boilers inspects and issues certificate for boilers; or Explosive Department inspects and issues certificate for petroleum storage tank, LPG/CNG tank in terms of provisions of the relevant laws. Fee as prescribed is charged and the same is ultimately deposited into the Government Treasury. A doubt has arisen whether such activities provided by a sovereign/public authority required to be provided under a statute can be considered as 'provision of service' for the purpose of levy of service tax. 2. The issue has been examined. The Board is of the view that the activities performed by the sovereign/public authorities under the provision of law are in the nature of statutory obligations which are to be fulfilled in accordance with law. The fee collected by them for performing such activities is in the nature of compulsory levy as per the provisions of the relevant statute, and it is deposited into the Government treasury. Such activity is purely in public interest and it is undertaken as mandatory and statutory function. These are not in the nature of service to any particular individual for any consideration. Therefore, such an activity performed by a sovereign/public authority under the provisions of law does not constitute provision of taxable service to a person and, therefore, no service tax is leviable on such activities. 3. However, if such authority performs a service, which is not in the nature of statutory activity and the same is undertaken for a consideration not in the nature of statutory fee/levy, then in such cases, service tax would be leviable, if the activity undertaken falls within the ambit of a taxable service. 4. Trade and field formations may be advised accordingly. 5. Hindi version will follow. (Gautam Bhattacharya) Commissioner (Service Tax)