Clarification regarding leviability of Service Tax in respect of Services provided by arbitral tribunal and members of such tribunal - Service Tax - TRADE NOTICE NO. 02/2016-17

GOVERNMENT OF INDIA OFFICE OF THE PRINCIPAL COMMISSIONER CENTRAL EXCISE SERVICE TAX PATNA C.R. (ANNEXE) BUILDING, BIR CHAND PATEL MARG, PATNA-800001. C. No. IV(39)38//Tech/CCE/PAT/14/934-56 Dated: 16-06-2016 TRADE NOTICE NO. 02/2016-17 Attention of the trade is invited to Circular No. 193/03/2016-Service Tax Dated 18.05.2016 issued vide F. No. 356/1/2016-TRU by Government of India, Ministry of Finance, Department of Revenue, CBEC, New Delhi regarding clarification regarding leviability of Service Tax in respect of services provided by arbitral tribunal and members of such tribunal. The contents of the aforesaid circular are reproduced below:- Sub : Clarification regarding leviability of Service Tax in respect of Services provided by arbitral tribunal and members of such tribunal - Reg. The CBEC has noticed that there is some confusion regarding the legal position with respect to continuance of reverse charge mechanism for services provided by arbitral tribunals and individual arbitrators on the arbitral tribunal, with effect from 1.4.2016. 2.1 Services provided by an arbitral tribunal to (i) any person other than a business entity; or (ii) a business entity with a turnover up to rupees ten lakh in the preceding financial year, are exempt from services tax [Entry 6(a) of Notification No. 25/2012-ST refer]. Arbitral tribunal has been assigned the same meaning in the exemption notificati01i No. 25/2012-ST [paragraph 2(c )] as in clause (d) of Section 2 of the Arbitration and Conciliation Act 1996, which is as follows:- arbitral tribunal means asole arbitrator or a panel of arbitrators 2.2 In the Budget 201017, the entry at (c) of Sl. No. 6 of notification 25/2012-ST has been omitted w.e.f 01.04.2016. It read as: Services provided by a: person represented on an arbitral tribunal to an arbitral tribunal. 3. The matter has been examined. It may be noted that the services provided or agreed to be provided by an arbitral tribunal to a business entity (turnover exceeding ₹ 10 lakh) located, in the taxable territory, is taxable under reverse charge mechanism and recipient of service is liable to discharge service tax liability [Rule 2(d)(D)(I) of Service Tax Rules, 1994 and Notification No. 30/2012-ST(SI. No.4) refer]. There is no change in the Budget 2016-17 w.r.t the said provisions. 4. It could be argued that service provided by an arbitrator on the panel of arbitrators, to the arbitral tribunal is taxable under forwarded charge. However, this does not appear to be a correct :interpretation of law. Any reference in Service Tax law to an arbitral tribunal necessarily includes the natural person on the arbitral tribunal, by virtue of clause (d) of Section 2 of the. Arbitration and Conciliation Act, 1996. Services are provided or agreed to be provided by the panel of arbitrators, as comprising the several natural persons on the said panel, to the business entity or to the arbitration institution approached by the business entity for purposes of arbitration. The liability to discharge service tax is on the service recipient, if it is a business entity located in the taxable territory with a turnover exceeding ₹ 10 lakh in the preceding financial year. 5. In view of the above, it is clarified that Service Tax liability for services provided by an arbitral tribunal (including the individual arbitrators of the tribunal) shall be on the service recipient if it is a business entity located in the taxable territory with a turnover exceeding ₹ 10 lakh in the preceding financial year. ( Issued in File C. No. IV(39)38/Tech/CCE/PAT/14/) (Anand Kumar) Joint Commissioner