Valuation. - Taxation of Services an Education Guide by CBEC - Service Tax

Guidance Note 8 - Valuation With the introduction of system of taxation of services based on the negative list there has been no fundamental change in the manner of valuation of service for the purpose of payment of service tax. The broad scheme remains the same barring some marginal changes carried out to align the scheme of valuation of taxable services and the Service Tax (Determination of Value) Rules, 2006 with the new system of taxation. Broadly these changes in the Valuation Rules are as follows:- As compared to the existing two schemes for valuation of works contract services -one under the rule 2A of the Valuation Rules and second under the Works Contract (Composition Scheme for Payment of Service Tax) Rules 2007 has been replaced with a unified scheme under the new rule 2A of Service Tax (Determination of Value) Rules, 2006 . A new Rule 2C has been inserted for determining the value of service involved in supply of food or any other article of human consumption or any drinks in a restaurant or as outdoor catering. The existing scheme of determination of value of such services through prescribed abatements in various exemption notifications has been done away with. There are certain changes in rule 6 of the Service Tax (Determination of Value) Rules, 2006 . All notifications that prescribed the abatements for working out the taxable value from the gross amount charged have been merged into one single exemption notification i.e., notification no. 26/2012- ST dated 20/6/12. The broad scheme of valuation and provisions of Valuation Rules have been explained through a set of examples, questions and answers below. 8.1. Broad Scheme of Valuation. 8.1.1 How is value of service relevant for the purpose of payment of service tax? In terms of the charging provisions contained in Section 66B , service tax is levied @ 12% on the value of taxable services. Therefore, value of service provided is relevant for determining the amount of service tax payable when a taxable service is provided by a person to another. 8.1.2 What is the value on which service tax is to be paid? The manner of value of service is provided in Section 67 . As per sub-section (1) of Section 67 wherever Service Tax is chargeable on any taxable service with regard to its value then its value shall- ( i ) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; ( ii ) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money as, with the addition of service tax charged, is equivalent to the consideration; ( iii ) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner. 8.1.3 If the gross amount charged is inclusive of service tax payable then would service tax be chargeable on the gross amount? No. As per sub-section (2) of section 67 where the gross amount chargeable by the service provider is inclusive of service tax payable then the value of such taxable service shall be such amount as, with the addition of such tax payable, is equal to the gross amount charged. For example if the gross amount charged for provision of service is Rs.1500 then the value of taxable service would be Rs. 1339.29 (1500 x 100/112) as after including the tax payable at Rs. 1339.29 @ 12% (which works out to Rs. 160.71) the total amount (1339.29 + 160.71) comes to Rs.1500. 8.1.4 Is it necessary that gross amount charged should have been received by the service provider prior to provision of service? No. As per sub-section (3) of Section 67 the gross amount charged includes any amount received towards the taxable service before during or after the provision of such service. 8.1.5 What is the meaning of 'consideration' referred to in sub clause (1) Section 67? The concept of consideration comes from the very root of the definition of service contained in clause (44) of section 65B as per which service has been defined as an activity carried out by a person for another 'for consideration'. For detailed discussion on consideration please refer to Point 2.2 of this Guide. The consideration could be monetary or non-monetary. 8.1.6 If provision of service is for the consideration for money then what will be the manner of determining the value of taxable service? In terms of clause (i) of sub-section (1) of Section 67 in case provision of service is for consideration in money, then the value of taxable service shall be the gross amount charged by the service provider for such service provided or agreed to be provided by him. 8.1.7 What is the meaning of 'gross amount charged'? 'Gross amount charged' has been defined in Explanation (c) of Section 67 to include payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and book adjustment, and any amount credited or debited, as the case may be, to any account, whether called Suspense account or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise. 8.1.8 What is the manner of determining the value of non-monetary consideration? As per clause (ii) of sub-section (1) of section 67 of the Act where the consideration received is not wholly or partly consisting of money the value of taxable service shall be the equivalent money value of such consideration. If the same is not ascertainable then the value of such consideration is determined under clause (iii) of section 67 read with rule 3 of the Service Tax (Determination of the value) Rules 2006 as follows:- On the basis of gross amount charged for similar service provided to other person in the ordinary course of trade; Where value cannot be so determined, the equivalent money value of such consideration, not less than the cost of provision of service. 8.1.9. As per clause (iii) of sub-section (1) of Section 67 in cases where provision of service is for a consideration which is not ascertainable then the value of taxable service shall be the amount as it may be determined in the prescribed manner. What are the situations where consideration is not ascertainable and what is the manner for determining the value in such cases are prescribed? There may be several situations wherein it may be difficult to determine the consideration received by service provider for provision of a service. Such situations can arise on account of several factors such as consideration of service being embedded in the total amount received as consideration for a composite activity involving elements of provisions of service and element of sale of goods or consideration for service being included in the gross amount charged for a particular transaction or consideration of service being wholly or partly in the nature of non-monetary consideration. The manner has been prescribed under Service Tax (Determination of Value) Rules 2006 . These rules inter-alia provide provisions in respect of the following situations: Determination of value of service portion involved in execution of works contract. Determination of value of service in relation to money changing. Determination of value of service portion involved in supply of food and any other article of human consumption or any drinks in a restaurant or as outdoor catering. Determination of value where such value is not ascertainable. The said rules also specify certain expenditures or costs that are incurred by the service provider which have to be included or excluded. The said rules also specify certain commissions or costs that are received by the service provider that have to be included or excluded while arriving at the taxable value. In addition to the Service Tax (Determination of Value) Rules 2006 , certain sub-rules in rule 6 of the Service Tax Rules, 1994 also provide simplified compounded mechanism for determination of value of taxable services in specified situations. These specified aspects of determination of value under the Service Tax (Determination of Value) Rules 2006 and the Service Tax Rules, 1994 have been dealt individually with in point nos. 8.2 to 8.7 below. 8.1.10 In addition to the two set of rules explained in point no 8.1.9 above, that have a bearing on the valuation of services, are there any exemption notifications that exempt certain portion of the gross amount charged from levy of service tax or in other words provide for abatements to arrive at the value of taxable services? Yes. Earlier there were a number of exemption notifications that prescribed the abatements for various categories of services. As another measure of simplification now all such abatements for specified category of services have been merged into a single notification no 26/2102 - ST dated 20/6/12 which has been dealt with in point no. 8.8 below. 8.2 Valuation of service portion in execution of a works contract Works contract has been defined in clause (54) of section 65B of the Act. Typically every works contract involves an element of sale of goods and provision of service. It is a well settled position of law, declared by the Supreme Court in BSNL's case [2006 (3) TMI 1 (SC)] , that a works contract can be segregated into a contract of sale of goods and contract of provision of service. With a view to bring certainty and simplicity the manner of determining the value of service portion in works contracts has been provided in Rule 2A of the Service Tax (Determination of Value) Rules, 2006 . In order to align this rule with the new system of taxation of services based on the negative list the old Rule 2A has been replaced by a new rule by the Service Tax (Determination of Value) Second Amendment Rules, 2012. The new provisions have been explained in this note 8.2.1 What is the manner of determination of value of service portion in execution of a works contract from the total contract? The manner for determining the value of service portion of a works contract from the total works contract is given in Rule 2A of the Service Tax (Determination of Value) Rules, 2006 . As per sub-rule (i) of the said Rule 2A the value of the service portion in the execution of a works contract is the gross amount charged for the works contract less the value of transfer of property in goods involved in the execution of the said works contract. Gross amount includes Gross amount does not include Labour charges for execution of the works Value of transfer of property in goods involved in the execution of the said works contract. Note: As per Explanation (c) to the said sub-rule (i), where value added tax or sales tax has been paid or payable on the actual value of property in goods transferred in the execution of the works contract, then such value adopted for the purposes of payment of value added tax or sales tax, shall be taken as the value of property in goods transferred in the execution of the said works contract. Amount paid to a sub-contractor for labour and services Charges for planning, designing and architect's fees Charges for obtaining on hire or otherwise, machinery and tools used for the execution of the works contract Cost of consumables such as water, electricity, fuel, used in the execution of the works contract Cost of establishment of the contractor relatable to supply of labour and services and other similar expenses relatable to supply of labour and services Value Added Tax (VAT) or sales tax, as the case may be, paid, if any, on transfer of property in goods involved in the execution of the said works contract. Profit earned by the service provider relatable to supply of labour and services 8.2.2. Is there any simplified scheme for determining the value of service portion in a works contract? Yes. The scheme is contained in the clause (ii) of rule 2A of the Service Tax (Determination of Value) Rules, 2006 . As per this scheme the value of the service portion, where value has not been determined in the manner as provided in clause (i) of rule 2A (explained in point 8.2.1 above), shall be determined in the manner explained in the table below - Where works contract is for... Value of the service portion shall be... (A) execution of original works forty percent of the total amount charged for the works contract (B) maintenance or repair or reconditioning or restoration or servicing of any goods seventy per cent of the total amount charged including such gross amount (C) in case of other works contracts, not included in serial nos. (A) and (B) above, including contracts for maintenance, repair, completion and finishing services such as glazing, plastering, floor and wall tiling, installation of electrical fittings. sixty percent of the total amount charged for the works contract Important -As per the Explanation (II) to clause (ii) of rule 2Aof the said Rules 'total amount' referred to in the second column of the table above would be the sum total of gross amount charged for the works contract and the fair market value of all goods and services supplied in or in relation to the execution of works contract, under the same contract or any other contract, less (i) the amount charged for such goods or services provided by the service receiver; and (ii) the value added tax or sales tax, if any, levied to the extent they form part of the gross amount or the total amount, as the case may be. 8.2.3 How is the fair market value of goods or services, so supplied, be determined to arrive at the total amount charged for a works contract? As per the proviso to Explanation (II) to clause (ii) of rule 2A of the Valuation Rules the fair market value of the goods or services so supplied shall be determined in accordance with the generally accepted accounting principles. 8.2.4. What are original works'? As per Explanation (I) to clause (ii) of rule 2A of the Valuation Rules 'Original works' means: all new constructions; all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable; erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise. 8.2.5 Can the manner of determination of 'total amount charged' be explained by way of a suitable example? The manner of arriving at the 'total amount charged' is explained with the help of the following example pertaining to works contract for execution of 'original works'. S. No. NOTATION AMOUNT (in Rs.) 1 Gross amount received excluding taxes 95,00,000 2 Fair market value of goods supplied by the service receiver excluding taxes 10,00,000 3 Amount charged by service receiver for 2 5,00,000 4 Total amount charged (1 +2-3) 1,00,00,000 5 Value of service portion(40% of 4 in case of original works) 40,00,000 Note: When the service provider pays partially or fully for the materials supplied by the service receiver, gross amount charged would inevitably go higher by that much amount. 8.3 Determination of value of service in relation to money changing In services of money changing including sale and purchase of foreign currency the problem of valuation arises on account of the fact that as per normal trade practice in such services the consideration is inbuilt in the difference between the selling/buying rates and the Reserve Bank of India (RBI) reference rate for that currency at that time. Accordingly a separate Rule 2B provides for the manner of determination of value of service in relation to money changing. 8.3.1 Would sale and purchase of foreign currency or money changing not be excluded from the definition of service as being transaction only in money? No. As per Explanation 2 to clause (44) of Section 65B , which defines 'service', activity of conversion of one currency into another for which a separate consideration is charged would not get tantamount to a transaction only in money. In transactions of sale and purchase of foreign currency or money changing since a separate consideration is charged these would not be excluded from the definition of 'service'. 8.3.2 What is the manner of determination of value of service in relation to money changing including sale and purchase of foreign currency? If a currency is exchanged from or to Indian Rupees then, as per Rule 2B of the Valuation Rules, the value of taxable service shall be equal to the difference in the buying rate or the selling rate, as the case may be, and the RBI reference rate for that currency. For example if US$ 1000 are sold by a customer @ Rs55 per US$ and RBI reference rate for US$ is Rs.55.73 then the taxable value shall be Rs.730 (1000 x 0.73). 8.3.3 How would the value be determined if the RBI reference rate for a currency is not available? As per the first proviso to Rule 2B in case RBI reference rate for a currency is not available the value shall be 1% of the gross amount of Indian Rupees provided or received by the person changing the money. 8.3.4 How would the value of taxable service be determined if foreign currency is exchanged for another foreign currency? These situations are dealt with in second proviso to Rule 2B as per which in such situations the value of taxable service shall be equal to 1 % of the lesser of the two amounts the person changing the money would have received by converting one of the currencies into Indian Rupees on that day at the reference rate provided by RBI. 8.4 Valuation of service portion involved in supply of food or any other article of human consumption or any drink in a restaurant or as outdoor catering. In terms of article 366(29A) of the Constitution of India supply of any goods, being food or any other article of human consumption or any drink (whether or not intoxicating) in any manner as part of a service for cash, deferred payment or other valuable consideration is deemed to be a sale of such goods. Such a service therefore cannot be treated as service to the extent of the value of goods so supplied. The remaining portion however constitutes a service. It is a well settled position of law, declared by the Supreme Court in BSNL's case [2006 (3) TMI 1 (SC)] , that such a contract involving service along with supply of such goods can be dissected into a contract of sale of goods and contract of provision of service. Since normally such an activity is in the nature of composite activity, difficulty arises in determining the value of the service portion. In order to ensure transparency and standardization in the manner of determination of the value of such service provided in a restaurant or as outdoor catering a new rule 2C has been inserted in the Service Tax (Determination of Value) Rules, 2006 by the amendment rules of 2012. This manner of valuation is explained in the points below. 8.4.1 Are services provided by any kind of restaurant, big or small, covered by the manner of valuation provided in Rule 2C of the Valuation Rules? Yes. Although services provided by any kind of restaurant would be valued in the manner provided in Rule 2C , it may be borne in mind that the following category of restaurants are exempted - Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year, and which has a license to serve alcoholic beverage. Below the threshold exemption. 8.4.2. How is the value of service portion to be determined in supply of food or any other article of human consumption or any drink in a restaurant or as outdoor catering? The manner of determination of service portion in such an activity is very simple and is given in Rule 2C of the the Service Tax (Determination of Value) Rules, 2006 . In terms of the said rule value of the service portion shall be determined in the following manner- Value of service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner ..... Shall be ......... per cent of the total amount charged: In a restaurant 40 As part of outdoor catering 60 Important - As per Explanation 1 to the said Rule 2C 'Total amount' (referred to in the second column of the table above) means the sum total of gross amount charged and the fair market value of all goods and services supplied by the service receiver in or in relation to the supply of food or any other article of human consumption or any drink (whether or not intoxicating), under the same contract or any other contract, less (i) the amount charged for such goods or services provided by the service receiver; and (ii) the value added tax or sales tax, if any, levied to the extent they form part of the gross amount or the total amount, as the case may be. The clarification given in point no 8.2.5 above would, mutatis mutandis, apply to valuation in this case also. 8.4.3. What are the restrictions, if any, on availment of Cenvat credit by such service providers? In terms of the Explanation to Rule 2C of the Valuation Rules any goods meant for human consumption classifiable under chapters 1 - 22 of Central Excise Tariff are not 'inputs' for provision of such service. Cenvat Credit is, therefore, not available on these items. Availability of Cenvat credit on other inputs, input services and capital goods would be subject to the provisions of the Cenvat Credit Rules, 2004 including the provisions relating to reversal of credits contained in rule 6 of the said rules. It may be noted the sale of food in the restaurant would amount to clearance of exempt goods and thus the provisions of Rule 6 of Cenvat Credit Rules will be applicable. 8.4.4 Would Rule 2C of the Valuation Rules also apply to determination of value of service portion in cases of supply of food or any other article of human consumption or any drink, in a premises, including hotel, convention center, club, pandal, shamiana or any place specially arranged for organizing a function? No. Rule 2C applies only in cases of restaurants and outdoor catering. For valuation of service portion where such supplies are made in any other premises like hotel, convention center, club, pandal, shamiana or any place specially arranged for organizing a function an abatement of 30% has been provided for in exemption notification no 26/2012-ST dated 20/6/12. For details please refer to serial no. 4 of the table in point no 8.8 below. 8.5 Inclusion or exclusion from value of certain expenditure or costs borne by the service provider. Rule 5 of Service Tax (Determination of Value) Rules, 2012 lays down the details of expenditure and cost borne by the service provider which have to be included or excluded while determining the value of taxable service. 8.5.1 What is the expenditure or costs that are to be included in the value of taxable services as per rule 5 of the Valuation Rules? As per Rule 5 any expenditure or cost that are incurred by the service provider in the course of providing taxable services are treated as consideration for taxable service provided or agreed to be provided and shall be included in the value for the purpose of charging Service Tax on the said service. However, Explanation to sub-rule (1) of Rule 5 clarifies that for the value of telecommunication services shall be the gross amount paid by the person to whom the service is actually provided (i.e. the subscriber). 8.5.2 Which costs or expenditure is to be excluded from the value of taxable service as per Rule 5? As per sub rule (2) of Rule 5 the expenditure or cost incurred by the service provider as a pure agent of the recipient of the service shall be excluded from the value of taxable service if all the following conditions are satisfied: the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured; the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service; the recipient of service is liable to make payment to the third party; the recipient of service authorises the service provider to make payment on his behalf; the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party; the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service; the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account. 8.5.3 What is the meaning of pure agent? Pure agent has been defined in Explanation to sub-rule 2 of Rule (5) of the Valuation Rules as a person who- enters into a contractual agreement with the recipient of service to act as his pure agent to incur expenditure or costs in the course of providing taxable service; neither intends to hold nor holds any title to the goods or services so procured or provided as pure agent of the recipient of service; does not use such goods or services so procured; and receives only the actual amount incurred to procure such goods or services. 8.6 Cases in which commission, costs etc. received by the service provider will be included or excluded. Rule 6 of the Valuation Rules deals with specific situation where certain commission or costs received by the service provider would be included as part of the taxable service. INCLUSIONS the commission or brokerage charged by a broker on the sale or purchase of securities including the commission or brokerage paid by the stock-broker to any sub-broker; the adjustments made by the telegraph authority from any deposits made by the subscriber at the time of application for telephone connection or pager or facsimile or telegraph or telex or for leased circuit; the amount of premium charged by the insurer from the policy holder; the commission received by the air travel agent from the airline; the commission, fee or any other sum received by an actuary, or intermediary or insurance intermediary or insurance agent from the insurer; the reimbursement received by the authorised service station, from manufacturer for carrying out any service of any motor car, light motor vehicle or two wheeled motor vehicle manufactured by such manufacturer; the commission or any amount received by the rail travel agent from the Railways or the customer; the remuneration or commission, by whatever name called, paid to such agent by the client engaging such agent for the services provided by a clearing and forwarding agent to a client rendering services of clearing and forwarding operations in any manner; the commission, fee or any other sum, by whatever name called, paid to such agent by the insurer appointing such agent in relation to insurance auxiliary services provided by an insurance agent; and the amount realized as demurrage or by any other name whatever called for the provision of service beyond the period originally contracted or in any other manner relatable to the provision of service. EXCLUSIONS initial deposit made by the subscriber at the time of application for telephone connection or pager or facsimile (FAX) or telegraph or telex or for leased circuit; the airfare collected by air travel agent in respect of service provided by him; the rail fare collected by [rail travel agent] in respect of service provided by him; interest on delayed payment of any consideration for the provision of services or sale of property, whether moveable or immoveable; the taxes levied by any Government on any passenger travelling by air, if shown separately on the ticket, or the invoice for such ticket, issued to the passenger; accidental damages due to unforeseen action not relatable to the provision of service; subsidies or grants disbursed by the Government, not in the nature of directly influencing the value of service. (italics indicate the additions made in the Service Tax (Determination of Value) Second Amendment, Rules, 2012) 8.6.1. Does the interest for delayed payment for provision of a service includable in the taxable value? No. In terms of clause (iv) of Sub-rule 2 of Rule 6 delayed payments of any consideration for provision of service is excluded from the value of taxable service. 8.6.2. What is the scope of the exclusion entry related to accidental damages due to unforeseen actions not relatable to the provisions of service? This inclusion has been inserted vide the Serviced Tax (Determination of Value) Second Amendment Rules, 2012. In terms of this exclusion accidental damages are not to be included in the value of service provided the following two conditions are specified: The damages are due to unforeseen actions. The damages are not related to provisions of service. Examples- Insurance Companies provide insurance services to the clients for which the premium is charged. The premium charged is a consideration for the insurance service provided. However, in case due to an unforeseen action ,like an accident etc., a compensation is paid by the insurance company to the client then the money would not be included as part of value of taxable service as it is not relatable to the provisions of service but is only in the nature of consequence of provisions of insurance service. In case a landlord who has rented out his office building to a tenant receives compensation from the tenant for the damage caused to the building by an unforeseen action then such compensation would not form part of the value of taxable service related to tenant of his building as an unforeseen damage caused by the tenant is not relatable to provision of service of renting of the office building. 8.6.3. What is the scope of the exclusion entry relating to subsidies and grants disbursed by the Government, not in the nature or directly influencing the value of service? This exclusion entry has also been inserted by the Service Tax (Determination of Value) Second Amendment Rules, 2012. A subsidy influences the price directly when the price goes down proportionately to the amount of subsidy. In terms of this exclusion any subsidy or grant disbursed by the Government cannot form part of the value of taxable service unless such subsidy or grant directly influences the value of such service. 8.7. Compounding schemes for determination of value under the Service Tax Rules, 1994. In addition to the Service Tax (Determination of Value) Rules, 2006 various sub-rules Rule (6) of the Service Tax 1994 also provides for simplified compounding mechanism for determining the amount of service tax payable. These sub-rules either specify the service tax payable as a certain percentage of the gross amount of a specified sum received by the service provider or also provide for manner of determination of value of taxable service for other specified services. This facility is normally available as an option to the person responsible to pay service tax. These compounding schemes are tabulated below: Sub-rule of rule 6 Specified service Compounding scheme Conditions (7) Services provided by an air travel agent Pay an amount calculated at the rate of 0.6% of the basic fare (i.e. that part of the fare on which commission is normally paid to the travel agent by the airlines) in the case of domestic bookings, and at the rate of 1.2% of the basic fare in the case of international bookings, of passage for travel by air, during any calendar month or quarter Option, once exercised, shall apply uniformly in respect of all the bookings of passage for travel by air made by him and shall not be changed during a financial year under any circumstances (7A) An insurer carrying on life insurance business Option to pay tax (i) on the gross premium charged from a policy holder reduced by the amount allocated for investment, or savings on behalf of policy holder, if such amount is intimated to the policy holder at the time of providing of service; (ii) in all other cases 3% of the gross amount of premium charged in the first year and 1.5% of the premium charged in the subsequent years. Option shall not be available in cases where the entire premium paid by the policy holder is only towards risk cover in life insurance (7B) Service of purchase or sale of foreign currency, including money changing, provided by a foreign exchange broker, including an authorised dealer in foreign exchange or an authorized money changer Option to pay an amount calculated at the following rate (a) 0.12 percent, of the gross amount of currency exchanged for an amount upto rupees 100,000, subject to the minimum amount of rupees 30; and (b) rupees 120 and 0.06 per cent. of the gross amount of currency exchanged for an amount of rupees exceeding rupees 100,000 and upto rupees 10,00,000; and (c) rupees 660 and 0.012 per cent. of the gross amount of currency exchanged for an amount of rupees exceeding 10,00,000, subject to maximum amount of rupees 6000 The person providing the service shall exercise such option for a financial year and such option shall not be withdrawn during the remaining part of that financial year. (7C) Services by distributor or selling agent of promotion, marketing, organizing or in any other manner assisting in organising lottery, Option to pay- (i) Rs. 7000/- on every Rs. 10 Lakh (or part of Rs. 10 Lakh) of aggregate face value of lottery tickets printed by the organising State for a draw (If guaranteed prize payout is more than 80%) (ii) Rs. 11000/- on every Rs. 10 Lakh (or part of Rs. 10 Lakh) of aggregate face value of lottery tickets printed by the organising State for a draw (If guaranteed prize payout is less than 80%) 1. In case of online lottery, the aggregate face value of lottery tickets for the purpose of this sub-rule shall be taken as the aggregate value of tickets sold 2. The distributor or selling agent shall exercise such option within a period of one month of the beginning of each financial year and such option shall not be withdrawn during the remaining part of the financial year. 8.8 Notified abatements for determining the taxable value. All abatements available to services of specified categories have now been merged in one exemption notification no 26/2012-ST dated 20/6/12. In terms of the said notification, exemption is granted from so much of the service tax leviable, as is in excess of the service tax calculated on a value which is equivalent to a percentage specified in the corresponding entry in column (3) of the following Table, of the amount charged (or in some cases of specified amount) by such service provider for providing the said taxable service, unless specified otherwise, subject to the relevant conditions specified in the corresponding entry in column (4) of the said Table: Table Sl. No. Description of taxable service % Conditions (1) (2) (3) (4) 1 Services in relation to financial leasing including hire purchase 10 Nil. 2 Transport of goods by rail 30 Nil. 3 Transport of passengers, with or without accompanied belongings by rail 30 Nil. 4 Bundled service by way of supply of food or any other article of human consumption or any drink, in a premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organizing a function) together with renting of such premises 70 CENVAT credit on any goods classifiable under chapter 1 to 22 of the Central Excise Tariff Act, 1985 (5 of 1986) has not been taken under the provisions of the CENVAT Credit Rules, 2004 . 5 Transport of passengers by air, with or without accompanied belongings 40 CENVAT credit on inputs and capital goods, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004 . 6 Renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes 60 Same as above. 7 Services of goods transport agency in relation to transportation of goods. 25 CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004 . 8 Services provided in relation to chit 70 Same as above. 9 Renting of any motor vehicle designed to carry passengers 40 Same as above. 10 Transport of goods in a vessel 50 Same as above. 11 Services by a tour operator in relation to,- ( i ) a package tour 25 ( i ) CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004 . ( ii ) The bill issued for this purpose indicates that it is inclusive of charges for such a tour. ( ii ) a tour, if the tour operator is providing services solely of arranging or booking accommodation for any person 10 ( i ) CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004 . ( ii ) The invoice, bill or challan issued indicates that it is towards the charges for such accommodation. ( iii ) This exemption shall not apply in such cases where the invoice, bill or challan issued by the tour operator, in relation to a tour, only includes the service charges for arranging or booking accommodation for any person and does not include the cost of such accommodation. (iii) services other than those specified in (i) and (ii) above 40 (i) CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004 . (ii) The bill issued indicates that the amount charged in the bill is the gross amount charged for such a tour. 12. Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly except where entire consideration is received after issuance of completion certificate by the competent authority 25 (i) CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004 . (ii)The value of land is included in the amount charged from the service recipient. 8.8.1 Once the specified description of services has been done away with in the negative list regime how would the scope of services specified by way of description in the said notification be determined? The services specified in the said notification, which have been tabulated in the table above, have been so specified in self-explanatory terms. In addition certain terms that have been used in the said notification are already defined in section 65B of the Act (like goods transport agency, vessel, port etc) and others have been defined in the said notification itself (like chit, package tour, tour operator and financial leasing). 8.8.2 Would the gross amount charged for financial leasing services, including equipment leasing and hire purchase, also include the interest amount charged for such financial services? The gross amount charged for this service will be sum total of the following- 10% of the amount forming or representing interest; and Other charges such as lease management fees, processing fees, documentation charges and administrative fees. 8.9 Person responsible for determining the value of taxable service 8.9.1 Who is the person responsible for determining the value of taxable service? Since Service Tax has to be paid by the persons responsible to pay Service Tax on the basis of self-assessment for value of taxable service has to be determined by the person responsible for payment of Service Tax in accordance with the provisions of Section 67 of the Act and rules made there under. 8.9.2 Can the value determined by the person responsible to pay service tax be rejected by the Department? Yes. In terms of the provisions of Section 73 of the Finance Act 1994 and Rule 4 of Service Tax (Determination of value) Rules 2006 the value works out by the service provider or any other person responsible for payment of service tax can be rejected by Central Excise Officer if he has specified that the value so determined is not in accordance with the provisions of the act or the Valuation Rules. In such a situation the Central Excise Officer shall issue a Show Cause Notice to the serviced provider or any other person responsible for payment of Service Tax to Show Cause as to why the value of such taxable service for the purpose of charging service tax should not be fixed on the amount specified in the notice. After giving reasonable options and heard, the Central Excise Officer shall determining the value of such taxable service for the purpose of charging service tax in accordance with the provisions of the Finance Act 1994 and the Valuation Goods.