NEW TAXABLE SERVICES - BIRD'S EYE VIEW

[Dr. Sanjiv Agarwal]

Finance Bill, 2010 (Union Budget 2010-11) has proposed to introduce eight new taxable services in the service tax net. The tax on these services shall be levied from a 'notified date', once the Finance Bill, 2010 is enacted. It is expected that the Bill shall be enacted by third week of May 2010 and service tax on new services may be levied from June/ July 2010.

The new services sought to be added are -

* Services of promoting, marketing or organizing of games of chance, including lottery [Section 65 (105) (zzzzn)].

* Health services, namely:

* health check up undertaken by hospitals or medical establishments for the employees of business entities; and

* health services provided under health insurance schemes offered by insurance companies. [Section 65 (105) (zzzzo)] The tax on these health services would be payable only to the extent payment for such medical check up or preventive care or treatment etc. is made directly by the business entity or the insurance company to the hospital or medical establishment].

* Services provided for maintenance of medical records of employees of a business

* entity [Section 65 (105) (zzzzp)].

* Services of promoting of a 'brand' of goods, services, events, business entity etc

* [Section 65 (105) (zzzzq)].

* Services of permitting commercial use or exploitation of any event organized by

* a person or organization [Section 65 (105) (zzzzr)].

* Services provided by Electricity Exchanges [Section 65 (105) (zzzzs)].

* Services related to two types of copyrights hitherto not covered under existing taxable service 'Intellectual Property Right (IPR)', namely, those on (a) cinematographic films; and (b) sound recording [Section 65 (105) (zzzzt)].

* Special services provided by a builder etc. to the prospective buyers such as providing preferential location or external or internal development of complexes on extra charges [Section 65 (105) (zzzzu)].

Scope of New Services

An attempt has been made to provided 'at a glance' view of these new services as to their scope, taxable services, valuation and person liable to pay service tax. The date of enforcement and accounting codes shall be notified later.

Commercial use/ Exploitation of Event Services

Meaning

Commercial use or exploitation of broadcasting or viewing rights of art, entertainment, business, sport, games, marriage, contests etc. This includes permission to record and broadcast of such event by such broadcaster (service recipient)

Taxable Services

Any service provided or to be provided to any person, by any other person, by granting the right or by permitting commercial use or exploitation of any event including an event relating to art, entertainment, business, sports or marriage organised by such other person;

Value of Taxable Services

Gross amount received by the person or organization who permits the recording and broadcasting of the event from the person who seeks to commercially exploit the event.

Person Liable

Any person grating the right or permitting commercial use or exploitation of any event of any other person.

Copyright Services

Meaning

Copy right services are not covered under Intellectual Property Right (IPR) Services . Copyright is defined in Indian Copyright Act, 1957 to cover original literary, dramatic , musical and artistic works, recording of cinematographic films and sound recording. For service tax purpose, copyright cover only two types of copyright viz, cinematographic films recording and sound recording.

Taxable Services

Any service provided or to be provided to any person, by any other person, for-

(a) transferring temporarily; or

(b) permitting the use or enjoyment of, any copyright defined in the Copyright Act, 1957, except the rights covered under sub clause (a) of clause (1) of section 13 of the Copyright Act, ie, original literary, dramatic , musical and artistic works.

Value of Taxable Services

Gross amount of consideration received for temporary transfer or permission to copyright from another person.

Person Liable

Any person grating the permission to use or enjoy copyright or transfer temporally the copyright to any other person.

Electricity Exchange Services

Meaning

The services provided by electricity exchange approved by Central Electricity Regulatory Commission (CERC) shall be covered. This would include trading , processing , clearing or settlement of contracts- spot or forward in electricity. The electricity exchanges are similar to stock exchanges or commodity exchanges and deal in transactions of electricity.

Taxable Services

Any service provided or to be provided to any person, by an electricity exchange, by whatever name called, approved by the Central Electricity Regulatory Commission constituted under section 76 of the Electricity Act, 2003, in relation to trading, processing, clearing or settlement of spot contracts, term ahead contracts, seasonal contracts, derivatives or any other electricity related contract;

Value of Taxable Services

Gross amount or charges recovered for the services by the association authorized by CERC for the services in relation to assisting, regulating, controlling the business of trading, processing and settlement pertaining to sale or purchase of electricity.

Person Liable

Any CERC approved electricity exchange or association providing taxable services to any other person.

Health Services

Meaning

Health services would cover health check up undertaken by hospital or medical establishment for the employees of business entities and health services provided under health insurance schemes offered by the insurance companies. The services covered will be health check up, preventive care and medical treatment where payment is made by the business entity being employer or the insurance company.

Taxable Services

Any service provided or to be provided by any hospital, nursing home or multi-specialty clinic,-

(i) to an employee of any business entity, in relation to health check-up or preventive care, where the payment for such check-up or preventive care is made by such business entity directly to such hospital, nursing home or multi-specialty clinic; or (ii) to a person covered by health insurance scheme, for any health check-up or treatment, where the payment for such health check-up or treatment is made by the insurance company directly to such hospital, nursing home or multi-specialty clinic;

Value of Taxable Services

Gross amount charged by the hospital from the employer of the patient; gross amount of medical charges paid by insurance companies to be hospitals on behalf of the business entities / employees. No service tax would be payable on amount paid by the patients directly.

Person Liable

Any hospital, nursing home or multi specialty clinic providing health check up or preventive care to employees of business entity; Any hospital, nursing home or multi specialty clinic providing services to insurance companies for medical treatment of insured patients .

Maintenance of Medical Record Services

Meaning

This covers service provided for maintenance of medical records of employees of a business entity for a consideration. These records may be maintained by certain hospitals or by independent record keeping agencies for medical or non medical purposes.

Taxable Services

Any service provided or to be provided to any business entity, by any other person, in relation to storing, keeping or maintaining of medical records of employees of a business entity.

Value of Taxable Services

Gross amount charged by the service provider from the business entity for maintenance of medical records.

Person Liable

Any person providing taxable services of maintenance of medical records of employees of business entities. The service recipient should be a business entity.

Promotion of Brand Services

Meaning

This induces the services of promoting of a brand of goods, services, events, business entity including endorsement of brand, name, logo, mark etc of a business entity with the objective of promotion or advertisement of such goods, services or events, as the case may be.

Taxable Services

Any service provided or to be provided to any person, by any other person, through a business entity or otherwise, under a contract for promotion or marketing of a brand of goods, service, event or endorsement of name, including a trade name, logo or house mark of a business entity by appearing in advertisement and promotional event or carrying out any promotional activity for such goods, service or event. Brand includes symbol, monogram, label, signature or invented words which indicate connection with the said goods, service, event or business entity;

Value of Taxable Services

Gross amount or contractual amount charged by the service provider from the brand owner for promotion or endorsement etc.

Person Liable

Any person providing or marketing a brand of any other person through a business entity or otherwise.

Promotion of Games of Chance or Lottery

Meaning

Promotion, marketing, organizing or assisting in any manner in the organizing of (a) games of chance, (b) lottery (c) bingo (d) lotto or games called by any other name conducted in any manner- physically, electronically or via internet. This service will no longer be covered under business auxiliary services.

Taxable Services

Any service provided or to be provided to any person, by any other person, for promotion, marketing, organising or in any other manner assisting in organising games of chance, including lottery, bingo or lotto in whatever form or by whatever name called, whether or not conducted through internet or other electronic networks.

Value of Taxable Services

Gross amount charged by the service provider for providing services of promoting, marketing or organizing of any game of chance or lottery..

Person Liable

Any person providing taxable services of promotion of games of chance or lottery (covers distributors and selling agents)

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