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TMI BlogService Tax on 10 new services effective from 16-8-2002 — ClarificationsX X X X Extracts X X X X X X X X Extracts X X X X ..... tation of the period of limitation for issue of show cause notice for recovery of service tax in cases when return is filed, when no return is filed, when assessment is provisional and when any sum has erroneously been refunded. 4.2 Section 75 has been amended to provide for charging of interest at the rate of fifteen percent per annum (instead of the twenty four percent per annum) for delayed payment of service tax. 4.3 Section 78 has been amended to empower the Assistant Commissioner/Dy. Commissioner to impose penalty without prior approval of the Commissioner of Central Excise in cases where the value of taxable service suppressed/furnished does not exceed Rs. 2 lakh. Hitherto this limit was Rs. 25,000. 4.4 Section 82 has been amended to provide specifically for the power to seize documents relevant to any proceedings under the service tax law. 4.5 Section 83 has been amended to make section 11D of the Central Excise Act applicable to service tax. Accordingly, if any amount is recovered by any person as "service tax", then such person bound to pay it to the Government. The law provides for its recovery in case of his failure to do so. 4.6 Section 94 has been amended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roadcasting agency or organisation" has been inserted with effect from 16-7-2001. It is now incorporated in the definition itself that in case of foreign broadcasting channels, broadcasting would include the activity of selling of time slots or obtaining sponsorship for broadcasting of any programme or collecting the broadcasting charges on behalf of such channel by its branch office or subsidiary or representative in India or any agent or any other person acting on their behalf. 6.2 Attention is invited to section 148(2) of the Finance Act. This has mandated that the broadcasting agencies, who did not pay service tax earlier, would have to pay all dues within thirty days from the date on which the Finance Bill, 2002 received the assent of the President (i.e. 11-5-2002), otherwise they will have to pay dues along with the interest. The Commissioner would have no doubt taken the necessary action accordingly. If any recoveries are still pending, the same may kindly be brought to the notice of the Ministry by the Commissioner concerned within a fortnight. 7. Service Tax Credit Rules, 2002 : 7.1 The Service Tax Credit Rules, 2002 have been made to allow credit within the same cat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be paid by the Insurance Company (Insurer). Notification No. 12/2002-ST refers. Accordingly in case of insurance agents, service tax in respect of their services will have to be paid by the life insurance companies. 8.2 As per the provisions existing hitherto, in the case of a service provider who is a non resident or from outside India and does not have an office in India the service tax has to be paid either by such service provider or by a person authorized by him. However, it is reported that difficulties arise in collecting service tax from such service provider as they leave the country after rendering the service. To smoothen the tax collection, it has now been prescribed in the Service Tax Rules that in such cases the service receiver in India would be liable to pay service tax on behalf of the service provider (refer Notification No. 12/2002-S.T.). 8.3 On delay in payment of service tax, penalty and interest is chargeable. As regards the issue as to which date should be deemed to be the date of payment of service tax, there are divergent views. In some cases the date on which the service tax is credited to the Government account is being treated as the date on whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppended as per details below. (i) Life insurance, including insurance auxiliary service relating to life insurance. (Annexure I) (ii) Cargo handling service (Annexure II) (iii) Storage and warehousing services (Annexure III) (iv) Event Management (Annexure IV) (v) Rail Travel Agent (Annexure V) (vi) Health club fitness centres (Annexure VI) (vii) Beauty parlours (Annerure VII) (viii) Fashion Designers (Annexure VIII) (ix) Cable Operators (Annexure IX) (x) Dry cleaning service (Annexure X) The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to sub-clause or clause means clause or sub-clause of section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002. 11.1 The new assessee are required to file for service tax registration No. in form ST-1 to the jurisdictional Superintendent within thirty days from 16-8-2002. The ST-1 form is enclosed herewith (Annexure XI). In case of failure to take registration within the stipulated time of thirty days, the assessee would be liable to pay a mandatory penalty of five hundred rupees. 12. The Commissioners are reque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to exempt the service tax leviable on life insurance service (refer to Notification No. 9/2002-S.T., dated 1-8-2002). As a result, service tax is not payable on the service provided by an insurer to a policy holder in relation to life insurance business. 5. Insurance auxiliary services relating to general insurance business were brought into tax net last year with effect from 16-7-2001. This levy has now been extended to cover the insurance auxiliary service relating to life insurance also. 5.1 Services covered in this category are the services provided by the insurance agents to the insurer/policy holder, by actuary to the insurer or by an intermediary or insurance intermediary to insurer/policy holders. Insurance agents provide service to insurance company in relation to marketing of insurance policies. They also provide service to the policy holder by providing information/advice on the types of insurance policies, processing of documentation, remitting of insurance premium, etc. Actuarial services are provided by the actuaries to the insurance companies. They cover diverse fields such as calculating insurance risks and premia, insurance claims adjustment services such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation of cargo. The taxable service, as per sub-clause (zr) of clause (90), is any service provided, to any person, by a cargo handling agency in relation to cargo handling services. 3. The services which are liable to tax under this category are the services provided by cargo handling agencies who undertake the activity of packing, unpacking, loading and unloading of goods meant to be transported by any means of transportation namely truck, rail, ship or aircraft. Well known examples of cargo handling service are services provided in relation to cargo handling by the Container Corporation of India, Airport Authority of India, Inland Container Depot, Container Freight Stations. This is only an illustrative list. There are several other firms that are engaged in the business of cargo handling services. 3.1 The services provided in relation to export cargo and passenger baggage are excluded from tax net. 3.2 Mere transportation of goods is not covered in the category of cargo handling and is therefore not liable to service tax. 3.3 Cargo handling service provided in relation to storage of agricultural produce (scope of the term "agricultural produce" is given under the stor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow that the Goods are for export. 7. Passenger baggage has been excluded from the levy of service tax. In this regard a point has been raised as to whether unaccompanied baggage of a passenger attracts service tax under the category of passenger baggage. It is clarified that unaccompanied baggage of a passenger will not be leviable to service tax. 8. A point has been raised by Airports Authority of India (AAI) as to whether service tax will be leviable in respect of handling of transhipment of export cargo from one international carrier to another international carrier or from a domestic carrier to an international carrier. It is clarified that so long as the cargo is for export, no service tax on handling of such cargo is leviable. For domestic cargo service tax will be applicable. 9. Another point raised by them is that they undertake transhipment of import cargo from international to domestic carrier which will be ultimately cleared at the final domestic destination. It is stated that the service rendered by them should be held as exempted and it merely relates to transportation of goods. This is not factually correct. Under the Notification No. Cargo/13519/Pt. I, dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, then towards customs duties and then to the custodian of the goods. It is clarified that no cargo handling service can be said to have been rendered in such cases, therefore service tax is not leviable. 13. Some of the cargo handling agencies may also act as marketing agents for individual airlines for which they get a commission, which seems to range from 5% to 15% of the freight. The question is whether service tax is payable on this. Marketing or canvassing for cargo for airlines does not come within the ambit of cargo handling services. Hence no service tax is payable under the category of cargo handling service. 14. CFSs also sometimes undertake storing/washing/repairing and handling of empty containers for the shipping lines for which they charge the shipping lines. Empty containers cannot be treated as cargo. Therefore, the activities mentioned above do not come within the purview of cargo handling services. 15. Another doubt raised in relation to cargo handling services is that whether individuals undertaking the activity of loading or unloading of cargo would be leviable to service tax. For example, if someone hires labour/labourer for loading or unloading of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome under the purview of the term 'agricultural produce'. 5. It has been stated that in some case a storage owner only rents the storage premises. He does not provide any service such as loading/unloading, stacking, security etc. A point has been raised as to whether service tax would be leviable in such cases. It is clarified that mere renting of space cannot be said to be in the nature of service provided for storage or warehousing of goods. Essential test is whether the storage keeper provides for security of goods, stacking, loading/unloading of goods in the storage area. 6. A point has been raised by the Airport Authority of India (AAI) that they have established cold storage for perishable goods at cargo complexes at various places as part of cargo warehousing activities and whether the exemption provided in respect of cold storage would be applicable to these cold storages also. It is clarified that service provided by a cold storage has been specifically excluded from the tax net. Therefore the service of cold storage provided by AAI will also be exempt. 7. Another point raised is that AAI are collecting terminal charges which is only a facilitation charge for provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e would be eligible to take credit of service tax paid on cargo handling services rendered by the H T contractors and adjust the same against his service tax liability on cargo handling services provided he raises a separate bill for the same to his client. In other words, he cannot adjust the credit against storage and warehousing service charges. Annexure IV Event management service 1. The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to sub-clause or clause means clause or sub-clause of section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002. 2. As per clause (34), "event management" means any service provided in relation to planning, promotion, organising or presentation of any arts, entertainment, business, sports or any other event and includes any consultation provided in this regard. Vide clause (90)(zu), taxable service means any service provided to a client, by an event manager in relation to event management. Event manager has been defined in clause (35) as any person who is engaged in providing any service in relation to event management in any manner. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax on their " taxable service". It is clarified that service tax under the category of event management is not leviable on the sale proceeds of tickets or revenue generated from the sale of space. Annexure V Rail Travel agent 1. The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to sub-clause or clause means clause or sub-clause of section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002. 2. As per clause (72), "rail travel agent" means any person engaged in providing any service connected with booking of passage for travel by rail. The taxable service is any service provided to a customer, by a rail travel agent in relation to booking of passage for travel by rail. 3. As per section 67, the value of taxable service includes the commission or any amount received by the rail travel agent from the Railways or the customer but does not include the rail fare collected by the rail travel agent. 4. A point has been raised as to whether the service tax is leviable on rail travel agent not registered with railways. It is clarified that any person whether registered with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in case where clubs and fitness centers charge a monthly/periodic amount as membership fee and only members are allowed to avail their services. It is clarified that membership fee charged by the club is in lieu of service provided and therefore in such cases service tax would be leviable on periodic/monthly membership fee. 5. Another point relates to service tax on membership fee already collected. It is clarified that no service tax will be payable on membership fee already collected prior to the date on which the new service tax has come into force. 6. Certain recognized institutes impart diploma courses in yoga. A point has been raised as to whether service tax is leviable on such institutes. It is clarified that such institutes and research center do not fall in the category of health club and fitness center and accordingly would not be liable to service tax. Annexure VII Beauty parlours 1. The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to sub-clause or clause means clause or sub-clause of section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002. 2. As p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service in relation to fashion designing. As per sub-clause (zv) of clause (90), taxable service is any service provided to any person, by a fashion designer in relation to fashion designing. 3. Fashion designer conceptualise and create designs/patterns applying his sense of aesthetic, keen sense of colour, visual imagination, knowledge of market trend and as per requirement of the client. Accordingly fashion designer may be involved in designing of any goods which are intended to be worn by human being and where aesthetic/looks/fashion is a criterion for wearing it. Fashion designers work include selection of material (for example type of cloth, its colour, design, quantity etc.), preparing design as per the trend or as per his visual imagination, preparation of pattern incorporating the requirement of the client. Fashion designer also keeps in mind the occasion, season and time etc. when his designed article is intended to be worn. 4. A point has been raised as to whether tailors and jewellers will be covered under the service tax. Taxable service in this case is designing of goods intended to be worn by human being. A tailor is involved only in stitching of clothes. As such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tomer, by a cable operator in relation to cable services. 3. As per the Cable Television Network (Regulation) Act, 1995, the definitions of cable service and cable operator are as follows : "cable operator" means any person who provides, cable service through a cable television network or otherwise controls or is responsible for the management and operation of a cable television network; "cable service" means the transmission by cables of programmes including re-transmission by cables of any broadcast television signals; 4. The taxable service in this case is the cable services provided by the cable operators. The programme broadcast by television channel are received either by Multi System Operators (MSO) or directly by cable operators in the form of signals. Where MSO receives the signals, they first retransmit signals to the cable operator who in turn retransmits the same to the viewers through the cable network provided by the cable operator. Service tax is liable to be paid by the cable operator providing service to ultimate subscriber of cable services. 5. In some States, cable operators are also liable to pay entertainment tax. In such cases, a cable operator ..... X X X X Extracts X X X X X X X X Extracts X X X X
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