EXPANDED SCOPE OF 'SERVICE'

[Dr. Sanjiv Agarwal]

The term 'service' has been defined in section 65B(44) of the Finance Act, 1994 vide Finance Act, 2012 w.e.f. 1.7.2012. The Finance Bill, 2015 has sought to expand the scope of service for the purpose of service tax.

Amendment made by Finance Bill, 2015 (w.e.f. notified date)

Finance Bill, 2015 has amended the definition of ‘service’ under clause (44) of section 65B. Explanation - 2 has been substituted as under:

‘Explanation 2. - For the purposes of this clause, the expression “transaction in money or

actionable claim” shall not include--

2. any activity relating to use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged;

(ii) any activity carried out, for a consideration, in relation to, or for facilitation of, a transaction in money or actionable claim, including the activity carried out--

(a) by a lottery distributor or selling agent in relation to promotion, marketing, organizing, selling of lottery or facilitating in organizing lottery of any kind, in any other manner;

(b) by a foreman of chit fund for conducting or organizing a chit in any manner.'

Thus, the scope of transaction in money has been expanded to include both, transaction in money or actionable claim. By sub clause [a(ii)], a transaction in money or actionable claim are excluded from the meaning of ‘service’. With the new explanation, following services or activities have been carved out of the exclusion clause [a(ii)] and these shall now be taxable from a notified date :

(a) money transactions for a separate consideration charged

(b) service or facilitation of transactions in money or actionable claim for a consideration. This would specifically include.

2. services of a lottery distribution or selling agent as defined in clause (31A) of section 65B inserted by Finance Bill, 2015

(ii) services of a foreman of chit fund for organizing or conducting a chit as defined in clause (23A) of section 65B inserted by Finance Bill, 2015.

CBEC has clarified vide Letter No. DOF 334/5/2015-TRU dated 28.02.2015 as under -

'The intention in law has been to levy Service Tax on the services provided by:

(a) chit fund foremen by way of conducting a chit.

(b) distributor or selling agents of lottery, as appointed or authorized by the organizing state for promoting, marketing, distributing, selling, or assisting the state in any other way for organizing and conducting a lottery.

However, Courts have taken a contrary view in some cases, while in some cases the levy has been upheld.

An Explanation is being inserted in the definition of “service” to specifically state the intention of the legislature to levy Service Tax on activities undertaken by chit fund foremen in relation to chit, and lottery distributors and selling agents, in relation to lotteries [section 65 B (44)]. Further, an explanation is being added in entry (i) of section 66D to specifically state that these activities are not covered by the Negative List.'

This amendment shall be effective from a notified date after enactment of the Finance Bill, 2015.