Issue & Possible Resolution - Negative List

[Madhukar N Hiregange]

Issues and Possible resolution – Negative List

In this article we examine some of the common issues arising from the negative list entries in sequence.

Agriculture related services

1. Whether agriculture operations should be carried out in rural area only for coverage by negative list entry?

Comment: No. There is no condition that the agriculture activities should be performed in rural area only.

2. Whether activities of horticulture, animal husbandry or dairying etc are covered by the agriculture operations?

Comments: Yes. These activities are also in the nature of agriculture only. Animal husbandry and dairying are specifically used in the definition of agriculture. Horticulture activities mean intensive cultivation of fruit, vegetable, flowers etc. As these are also of the nature of agriculture, it is covered by the negative list entry.

3. Whether cold storage plant erected is entitled for exemption under Notification No. 12/2012.

Comments: Yes. But it is necessary that plant should be used in storage of agriculture produce only. Even if it is used for storage of non agriculture produce also, exemption may be granted as there is no requirement that it should be used solely or predominantly for agriculture produce only.

4. Is there any difference between agriculture produce as per earlier provisions and current provisions?

Comments: TRU letter B11/1/2002- dated 1-8-2002 had clarified that 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. would not come under the purview of the term ‘agricultural produce.

Under new provisions, “Agricultural produce” is defined as any produce of agriculture on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market. This would cover getting rice/ poha/ avalakki from paddy; cotton by ginning process.

Entry SI No. 20(i): transportation of rice by a rail or vessel,

Entry SI No. 21(d): by a GTA

Entry SI No. 40: loading, unloading, packing, storage and warehousing

 Entry SI No. 30(a): milling of paddy into rice.

If we examine, the essence of the earlier clarification and new definition appears to be same. A reference may be taken from earlier TRU letter for ascertaining whether a particular produce is agricultural produce or not.

5. Whether activities of fishing are also covered under agriculture as the activities are not carried out on the land?

Comments: Yes. There is no requirement that the activities should be performed on land only.

6. Whether the use of JCB in an irrigation facility, digging well in agricultural land for agricultural produce is covered under this entry?

      Comments:  Yes, these services could be exempted

Trading of Goods

1. Goods sold on “sale on approval” basis are returned back by the customer. Some usage charges are collected from the customer for the period of use of goods. Is it covered by the trading of goods?

Comments: Trading in goods means buying or selling of goods. It should result in transfer of property in goods. When goods sold are returned back by the customer, property therein does not pass on to the client. It is not covered by the definition of trading of goods and accordingly usage charges levied are liable to service tax.

2. If the assessee carries out some process on the inputs which does not amount to manufacture, does it become trading activity?

Comments: Yes, manufacturing activity is in the negative list. However, if any process carried out on purchased raw material which does not result in manufacturing activity, the said sale of goods would be considered as trading activity. It cannot be considered as service, as it involves transfer of title in goods, which is outside the definition of service.      

3. Whether service tax is applicable when there is a right to use the goods given by X to Y in exchange for a consideration?

Comments: No, as it is a transfer of right to use goods. This is specifically liable to VAT. There is no service involved in same.

4. Whether the lump sum single contract for sale of goods followed by installation is covered in negative list?

Comments: When it is a single contract, a view is possible that the installation charges collected could be treated as a part of the composite contract, the dominant nature of which is to make a sale of goods. But it could be contended by department that the transaction represents two distinct and separate contracts, one of sale and another for service. As such then contract of service in such transaction would be segregated and chargeable to service tax. This maybe applicable even if a single invoice is issued.  

Process amounting to manufacture or production of goods

1. If the activity carried out by the manufacturer (not under job work) does not amount to manufacture, whether it can be liable to service tax?

Comments: No, since the manufacturer is purchasing the inputs and then carrying out the process on his own account, the said activity cannot be considered as provision of service.

2. Can the job worker be called a manufacturer?

Comments: As per Section 2(f) of Central Excise Act, 1944, it is not necessary that only principal manufacturer be called as the manufacturer, it includes even job worker, if the activity performed by him amounts to manufacture. Excise duty is on manufacture, irrespective who is manufacturing the goods job worker or the principal manufacturer.

3. Where the process done by a job worker does not amount to manufacture but are used by principal in manufacturing of goods subject to ‘Nil’ rate of duty is covered in negative list?

Comments: Service tax would be levied on processes, not amounting to manufacture or production of goods carried out by a person for another for consideration. But there is an exemption under notification no.12/2012-ST dated 27.3.2012 for the intermediate production process as job work, where appropriate duty is paid by manufacturer.But appropriate rate of duty shall not include ‘Nil’ rate of duty or duty wholly exempt. Arguable only on point of intention.

4. Whether the coverage in negative list is available for manufactured excisable goods which are then exported without payment of duty?

Comments: Any process amounting to manufacture or production of excisable goods is covered. Hence in the opinion of the paper writer, the benefit of exemption is available.

5. Whether the coverage in negative list is available in case where the manufactured excisable goods resulting from process are returned to another processor and not to the principal?

Comments: In the opinion of the paper writer, the returning of the goods to the principal is constructive when the same are sent to another processor as per the direction of the principal. Therefore the benefit should be available.

6. Whether processing of goods resulting in manufacture of goods that are exempted or nil duty is covered?

Comments: The manufacture of excisable goods is covered in negative list. Whether leviable to a rate of duty or exempted from such duty by exemption notification, it would still be covered. It also covers the excisable goods, which are at nil rate of duty also.

Advertisement

1. Whether sale of space or time sold to advertisement agency on lump sum basis would be covered by the negative list entry?

Comments: Any sale of space or time for advertisement purpose is covered under the negative list entry. There is no condition in the definition that the sale of space or time should be directly to the advertiser. Bulk selling of space or time to advertisement agency for a specified period which in turn sells it to different advertisers on piecemeal basis would also be covered by the negative list entry and exempted from service tax. However, it does not include broadcasting on TV or radio.

2. An advertiser approaches advertisement agency to undertake advertisement activities for its company for the entire year for a contractual amount. Scope of work includes advertisement consultancy, choosing of different advertising medium, preparation of advertisement and display on mediums, purchase of space or time for display of advertisement on public places? Ascertain taxability.

Comments: Composite contract is given to advertisement agency for handling entire advertisement activity for the year on lump sum basis. If no separate contract is entered into and entire consideration is charged on lump sum basis without segregating charges towards different elements of advertisement, entire consideration received would be liable to service tax. However, if consideration towards sale of space or time on public places is charged separately, it would not be liable to service tax. There is no need for advertisement agency to follow the pure agent concept for such sale of space or time.

3. In case a person provides a composite service of providing space for advertisement that is covered in the negative list entry coupled with taxable service relating to design and preparation of the advertisement how would its taxability be determined?

Comments: This would be a case of bundled services taxability of which has to be determined in terms of the principles laid down in section 66F of the Act. The services rendered by advertisement, as given in the question, are in the nature of naturally bundled services. If the preparation of advertisement is incidental or ancillary for displaying on the space, it would be in the nature of sale of space or time for advertisement and would be exempted. Contrary, if the sale of space or time is part of the entire agreement for advertisement support without any segregation towards such charges, it would be in the nature of advertisement services and liable to service tax.

4. Would services provided by advertisement agencies relating to preparation of advertisements be covered in the negative list entry relating to sale of space for advertisements?

Comments: No. Services provided by advertisement agencies relating to making or preparation of advertisements would not be covered in this negative list entry and would thus be taxable. This would also not cover commissions received by advertisement agencies from the broadcasting or publishing companies for facilitating business, which may also include some portion for the preparation of advertisement.

5. Where advertisement agency raises separate bill towards its commission and sale of space charges, how service tax liability would be determined?

Comments: Charges received by advertisement agency towards it commission is not covered by the negative list entry. Consideration received towards sale of space or time would not be liable to service tax if shown separately.

6.  Whether the sale of space in a private circulation magazine is taxable?

Comments: Sale of space or time on any medium except broadcasting by TV or radio is covered by the negative list entry. Accordingly, sale of space in private circulation magazine is not liable to service tax.

7. Whether sale of space in server is covered under this head?

Comments: Sale of space or time on any medium except broadcasting by TV or radio is covered by the negative list entry. Server cannot be considered as TV or radio. Hence sale of space in server is covered under the negative list and exempted from service tax.

8. What would be taxability of space allowed in buses and public transport system run display of advertisement?

Comments: Not liable to service tax as per discussion in previous question.

9. Whether service tax should be charged by advertisement agency on commission or on full value of advertisement?

Circular: Service tax should be charged by advertisement agency on full value of the advertisement including the amount receivable towards commission.

10. Whether advertisement in a movie is covered under the entry “sale of space or time for advertisement”?

Comments: Advertisement in movie cannot be said as sale of space or time for advertisement.

11. Whether purchase of slots from broadcaster and sold to advertising agency is liable to service tax?

Comments: Broadcasting not covered under the negative list entry. Accordingly, it would be liable to service tax.

12. Agreement with foreign TV Channels to provide services such as collecting advertising material, providing information regarding displays, collecting payments from advertisers and remitting it to foreign companies is not liable - MTV Network India Pvt. Ltd. v CCE Mumbai [2006 (11) TMI 22 - CESTAT, MUMBAI ]

Comments: The above proposition does not hold good. Above activities of advertisement agency is liable to service tax.

13. Advertisement agency undertaking the making and sale of advertising materials in the form of banner, hoarding, film-slide or signage board would be liable to VAT or service tax.

Comments: The activity undertaken by the advertisement agency is composite in the nature i.e. sale of goods and provision of services. Composite contract cannot be split in the value of goods and service tax in the absence of Notification No. 12/2003. Accordingly, taxability is to be determined based on the dominant intention of the parties. If the intention of the parties is sale of goods, it would be liable to VAT. If intention is to provide services, it would be liable to service tax. In the given question, intention of the parties appears to be provision of services which would be liable to service tax on the gross consideration i.e. value of goods and services. However, state authorities may demand VAT on the value of goods sold.

14. Whether advertisement services rendered to government department is exempted from service tax?

Comments: There is no exemption on the advertisement services provided to government department. It is liable to service tax.

15. Whether the manufacture of signboards would come within the definition of ‘preparation” of advertisement?

Comments: The manufacture of the signboard would be an activity, which is liable under central excise and not under service tax. Further as the property gets transferred, it would be liable to VAT. In the value of sale, service cannot be included and vice versa as per the decision of the Supreme Court in BSNL [2006 (3) TMI 1 - Supreme court] and Imagic Creative Pvt. Ltd., [2008 (1) TMI 2 - Supreme Court of India].

16. Whether Canvassing is liable to service tax?

Comments: Canvassing refers to selling or reselling of space. It is covered under the negative list entry of sale of space or time for advertisement. However, canvassing for broadcasting in TV or radio is not covered by the negative list and is liable to service tax.

17. Whether the agency commission/discount provided by print media is taxable?

Comments: Sale of space or time in print media is not liable to service tax. However, commission or discount received by the advertisement agency is not in the nature of sale of space or time. It is liable to service tax.

18. Whether printing and publishing of yellow pages or business directory is liable to service tax?

Comments: Printing and publishing of yellow pages and business directory is not in the nature of sale or space time for advertisement.

Transportation of Goods

1. Whether transportation of coastal goods is covered by the negative list entry?

Comments: Coastal goods means goods, other than imported goods, transported in a vessel from one port in India to another port in India. Coastal ports are permitted to carry out the transportation of coastal goods. It is not covered by the negative list. The situation would be same even if the services are provided by foreign vessel.

2. Whether Indian vessel in the course of transporting the coastal goods within the ports of India, transports imported goods in this course, can be made liable to service tax?

Comments: Yes, any transportation of coastal goods by a vessel in coastal water is liable to service tax.

3. Whether transportation of goods through inland waterways is liable to service tax?

Comments: Transportation of goods through inland waterways is covered by the Negative list entry and not liable to service tax.

4. Are services provided as agents for inland waterways covered by negative list entry?

Comments: No. these are in the nature of services used for providing the negative list entry service of transport of goods on inland waterways and would not be covered by application of the rule for interpretation where services are specified by way of description contained in clause (1) of section 66F of the Act

5. Whether service tax is leviable on the transportation of export goods by aircraft?

Comments: Yes. There is no exemption on transportation of export goods through aircraft.

6. Whether the charges collected towards storing, handling, loading / unloading collected in relation to air transportation of cargo is liable?

Comments: The aircraft operator in addition to the actual airfreight is liable to consider all charges collected in relation to air transportation of cargo. Therefore, the charges collected towards storing, handling, loading / unloading needs to be factored for payment of service tax

7. Whether exemption is available on transportation of import goods through air?

Comments: Service provided for transportation of goods from outside India to first customs station of landing in India is covered by negative list entry and accordingly not liable to service tax. Any transportation of goods, imported or domestic, within India is liable to service tax.

8. An importer imported certain goods from Singapore through air. Route of flight is Singapore-Mumbai-Delhi. Importer cleared the goods at Delhi. Whether service tax is payable on freight charges paid for goods cleared at Delhi?

Comments: Negative list covers the transportation charges paid from a place outside India to the first customs station of landing in India. In the instant case, first customs station of landing in India is Mumbai. Any freight paid for transportation of goods beyond Mumbai is liable to service tax.

9. Whether service tax is payable on the goods transported from a place located outside India to a final destination which is also outside India?

Comments: Subject to the Place of Provision of Services Rules, service tax is chargeable on the goods transported from a place located outside India to a final destination which is also outside India.

10. Whether transportation of goods through rail is liable to service tax?

Comments: Exemption from payment of service tax on transportation of goods by rail has been extended to July 2011. In the negative list regime, there is no exemption to transportation of goods through railway except certain specified goods covered by S. No. 20 of the Notification No. 12/2012- ST. However, 70 percent abatement is allowed under Notification No. 13/2012- ST.

11. Whether transportation service provided by the truck owner and truck operator to end user directly is liable to service tax?

Comments: Services provided by truck owner directly to end user is covered by the negative list entry and is not liable to service tax.

12. Can the recipient of the GTA service who pays the service tax avail the CENVAT credit for making the payment towards this liability?

Comments: The CENVAT credit rules are clear that the recipient of services is not a provider of taxable services and therefore would not be admissible for the adjustment. Therefore the service receiver who is neither a manufacturer of excisable goods nor a taxable service provider would have to pay the service tax as receiver in cash.

13. Whether the exemption upto Rs. 10 Lakhs under Notification 6/2005 relating to small service provider would be available for this category of service?

Comments: The exemption is not available to the service recipient as the notification clearly excludes. However the GTA himself would be eligible for the exemption provided he satisfies the other conditions of previous year less than Rs.10 Lakhs of taxable services and providing of services other than branded and not availing the credits for capital goods, inputs or input services.

14. Whether the three wheelers are liable for service tax as GTA?

Comments: The definition of motor vehicle under the Motor Vehicles Act states that the four wheelers are only covered. Therefore three wheelers used for the purpose of transportation would not be under the levy.

15. Whether the benefit of cenvat credit is available on outward freight when the obligation of the seller is to deliver the goods at the buyer’s place?

Comments: C.B.E. & C. Circular No. 97/6/2007-S.T., dated 23-8-2007 clarifies that the credit is admissible if ownership of goods remain with seller till delivery at customer’s doorstep, Transit insurance is borne by the seller and property in goods are not transferred to buyer till delivery. Further freight charges are forming part of value of excisable goods and if the said conditions are met, the seller can avail the benefit of service tax paid on outward freight.

16. Demand draft is sent by courier from one city to another. Is courier charges levied by the courier agency is liable to service tax?

Comments: Above entry speaks for transportation of goods by courier. Demand draft is not goods but transaction in money. Sending of DD from one place to another involves rendering of services by the courier agency. In the absence of any entry in negative list and exemption notification, it is liable to service tax.

17. Whether charges levied by courier agency for exporting parcel and articles and delivery thereof abroad is liable to service tax?

Comments: Subject to Place of provision of Services Rules, charges levied by courier agency for exporting parcels and other articles and delivery thereof is liable to service tax.

18. Whether delivery of food bag/box is taxable?

Comments: The service provided by the Dabbawalas where the food bag is collected in the residence and delivered to offices. The taxable service definition provides transport of time sensitive goods. The food bag can also be considered as time sensitive but the same in the common trade understanding is not considered as courier services and therefore authors are of the opinion that the same cannot be taxable.

19. Whether the transport of courier goods in an A/c rent a cab by the rent a cab operator is liable to service tax?

Comments: No, the service is liable only to a courier agency. Since the activity of transport of goods is by a rent a cab operator to the courier agency the same can be considered to be part of negative list and not liable to service tax. However the department might take a view that rent a cab is taxable service and liable to service tax.

Admission to entertainment events or access to amusement facilities:

1. X Ltd wants to display the products in a musical event conducted by Z Ltd. The company has brought the admission rights for the entry to the event and displayed the product. Does the income received by Z Ltd is covered under this entry?

Comments: No, the entry to the admission event is covered only when it is for fun, recreation, pastime or enjoyment. If the person has any other motive, it shall be charged for service tax.  Since X Ltd has taken admission rights for promoting its products, this shall be of business nature and not covered under this entry.

2. Mr. H has been to a park by paying the entry fee of Rs. 500/-. The park has various amusement facilities for which separate fee is charged. Whether the amount received by park is chargeable to service tax?

Comments: The amount is not covered by the entry. The fee only gives admission to the park but not the access to the amusement facility. Therefore, the entry fee of Rs.500/- is liable for service tax.

3. Mr. A has been to a park by paying the entry fee of Rs. 5000/-. The park has various amusement facilities for which Rs. 3000/- is collected at the entry itself. Whether the entire amount received by park is chargeable to service tax?

Comments: Since Rs. 3000/- is giving an access to amusement facility, it shall be covered by this entry. However, the amount of Rs. 2000/- is collected only for admission to the park and not for accessing any amusement facility. Therefore, only Rs.3000/- is exempted.

4. Z Ltd owns and manages a resort wherein the property has facilities for convention center, amusement facilities, accommodation services and others. A family books the entire resort for 5 days for conducting marriage. The family has unlimited access to amusement facilities and also uses the convention center and accommodation services. Whether the entire amount received by Z Ltd is exempted?

Comments: No, the amount received by Z Ltd is not for the access to amusement facilities. Therefore, by applying the concept of Section 66 F, it shall not be covered under this entry since the essential character of service is to take convention centre.

Transmission or distribution of electricity by an electricity transmission or distribution utility

1. Whether the ‘Generation’ of electricity for a consideration is chargeable to service tax?

Comments: Electricity is specified in the First Schedule of Central Excise Tariff Act, 1985. Therefore, Electricity is excisable goods. And it has been held in the case of CMS (I) OPERATIONS & MAINTENANCE CO. P. LTD. Versus C. CE, PONDICHERRY 2007 (5) TMI 74 - CESTAT, CHENNAI that generation of electricity amounts to process of manufacture. Therefore, it not covered under the service tax law.

2.  Transmission Company (TC) has entered into an agreement with Distribution Company (DC) for supply of electricity to the end customer. The amount for the supply of electricity is paid to the TC and not to the DC. Whether the amount paid by the customer is covered under this entry since TC has not provided any service of transmission or distribution to end customer? 

Comments: In the given case, amount paid by end customer to TC is the consideration for the service of distribution done by DC to end customer. Consideration can flow from any person to any person.  Therefore, the amount is covered under this entry.

3. A Ltd is notified company to act as a state transmission utility. It provides the services of transmission and distribution to various customers. In this process it carries the electricity in 5 line transmission, out of which one line would be a neutral. This line is used for carriage of OFC, whether the income received pertaining to this carriage is also covered under this entry?

Specified Services pertaining to Education:

1. Are services provided by international schools giving international certifications like IB also covered in this entry?

Comments: Yes. Services by way of education up to higher secondary school or equivalent are covered in this entry.

2. Are services provided by boarding schools covered in this entry?

Comments: Boarding schools provide service of education coupled with other services like providing dwelling units for residence and food. This may be a case of bundled services if the charges for education and lodging and boarding are inseparable. Their taxability would be determined in terms of the principles laid down in section 66F of the Act. Such services in the case of boarding schools are bundled in the ordinary course of business. Therefore the bundle of services would be treated as consisting entirely of such service which determines the dominant nature of such a bundle. In this case since dominant nature is determined by the service of education other dominant service of providing residential dwelling is also covered in a separate entry of the negative list, the entire bundle would be treated as a negative list service.

3. Are services provided by way of education as a part of a prescribed curriculum for obtaining a qualification recognized by a law of a foreign country covered in the negative list entry?

Comments: No. To be covered in the negative list a course should be recognized by an Indian law.

4. If a course in a college leads to dual qualification only one of which is recognized by law would the service provided by the college by way of such education be covered in this entry?

Comments: Provision of dual qualifications is in the nature of two separate services as the curriculum and fees for each of such qualifications are prescribed separately. Service in respect of each qualification would, therefore, be assessed separately. If an artificial bundle of service is created by clubbing two courses together, only one of which leads to a qualification recognized by law, then by application of the rule of determination of taxability of a service which is not bundled in the ordinary course of business contained in section 66F of the Act it is liable to be treated as a course which attracts the highest liability of service tax. However incidental auxiliary courses provided by way of hobby classes or extra-curricular activities in furtherance of overall well being would be an example of naturally bundled course. One relevant consideration in such cases would be the amount of extra billing being done for the unrecognized component viz-a-viz the recognized course.

5. Are placement services provided to educational institutions for securing job placements for the students covered in this negative list entry?

Comments: No. Such services do not fall in the category of exempt services provided to educational institutions.

6. A society is providing service of education of preschool by taking the same service from a company. Whether the company can also be stated providing pre-school education?

Comments: Yes, since the service receiver has not been fixed in this entry, the services provided by the company shall also take color of the pre-school and thus satisfy the entry in the negative list.

7. Whether material provided by is taxable?

Comments: In absence of Notification No. 12/2003-ST dated 20.06.2003, the value pertaining to the materials cannot be deducted. Since the dominant nature would be of providing education service the value of materials shall also be liable to service tax. However, service provider may raise two separate invoices for supply of material and supply of services pertaining to taxable services and claim the former does not fit into the definition of service and therefore not liable. As far as the non- standard material is concerned, they can also adopt the same mechanism of different invoices but there might be a valuation issue.

8. Whether a proprietor providing coaching is taxable?

Comments: The service provided by any person is covered under this entry. So far as the education pertains to pre-school, secondary school or education leading to qualification or vocational course is provided, the person is covered under the entry. If there is any other service he shall be liable to service tax.

9. Whether providing vocational training in the field of engineering or biotech through computer is covered?

Comments: The entry provides exemption for a vocational training if it approved. The approved vocational education course is defined. If the service is covered under the approved list the same shall not be taxable, otherwise it is subjected to service tax.

10. Whether the value pertaining to building fee, captivation fee and others collected at the time of admission into institution is covered under this entry?

Comments: No, the services provided by in relation to admission are exempted where the educational services provided by institution are exempt. Therefore, all the fees mentioned above shall be exempted if the educational services provided by the institution are exempted.    

Services by way of renting of residential dwelling for use as residence:  

1. A building taken for commercial place but used for residence. Whether the rental income is covered under this entry?

Comments: No, the twin conditions of residential dwelling and used for residence as stated in the entry are to be satisfied cumulatively. Since the building pertains to the commercial place and not residential dwelling it does not get covered by the entry.

2. A building in residential dwelling but put to use for other than residence? Whether the rental income is covered under this entry?

Comments:  No, the twin conditions of residential dwelling and used for residence as stated in the entry are to be satisfied cumulatively. Since the building is put to use for other than residential purposes, it does not get covered by the entry.

3. Mr. X has taken flat on rent in the residential complex. He pays rent for the flat and parking slot separately. Whether the rental pertaining to the parking slot is covered by this entry?

Comments: Yes, by applying the concept enumerated in Section 66F, since the services are naturally bundled and the essential character is of renting for residential dwelling, the rental pertaining to parking slot is covered under this entry and not liable to service tax.

4. Mr. Y pays rent for the car parking slot without putting up in the residence of the same flat? Whether the rental pertaining to the parking slot is covered by this entry?

Comments: Since the rent is paid only for the car parking slot without renting the flat in the residence, it shall not be covered under this entry and therefore service tax is payable.

5. Whether the PG accommodation, hostels, furnished flats given for temporary stay are also covered under this entry?   

Comments: No, these residential dwellings are exploited for commercial purposes and therefore not covered under this entry.

Services pertaining to Financial Sector:

1. If any service charges or administrative charges or entry charges are recovered in addition to interest on a loan, advance or a deposit would such charges be also a part of this negative list entry?

Comments: According to TRU Circular, if any amount in the nature of administrative charges or entry charges is recovered in addition to interest on loan, advance or deposit, that amount is taxable. However, if the amount is charged to recover the opportunity cost in a case where the money borrowed, debt incurred and any facility is not utilized, that is not subjected to service tax since it is covered in the definition of interest as per income tax act, 1961.

2. To what extent is invoice discounting covered in the negative list entry?

Invoice discounting is covered only to the extent consideration is represented by way of discount

3. Would services provided by banks or authorized dealers of foreign exchange by way of sale of foreign exchange to general public be covered in this entry?

No. This entry only covers sale and purchase of foreign exchange between banks or authorized dealers of foreign exchange or between banks and such dealers.

It is hoped that this article would shed some light on some doubtful issues. For further doubts host on pdicai.org.  

Discussions to this article

[Sumit Kapoor]

Sir

There is recent clarification by finance minister dated 8th November 2013 ,that Rice and Baled cotton are not agriculture produce and therefore transport and storage of these two will be covered under service tax.

Need your advice

Thanks & Regards

[Madhukar N Hiregange]

In the budget it was withdrawn. Even cotton is a agri produce. Write to dept if oral explanation not having desired effect.