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Friday, January 18, 2008

Main forms of organizational communication

The importance of communication in business becomes even more apparent when we

consider the communication activities of an organization from an overall point of view.

As we can see from a review of Ram’s half hour at Typical, these activities fall into three

broad categories of communication; internal-operational, external-operational, and

personal.

Internal-operational communication

Internal-operational communication consists of the structured communication within the

organization directly related to achieving the organization’s work goals. By “structured”

we mean that such communication is built into the organization’s plan of operation. By

the “organization’s work goals” we mean the organization’s primary reasons for being-to

sell insurance, to manufacture nuts and bolts, to construct buildings, and the like.

The Typical Company, to use a familiar example, has as its major work goals the

making and selling of whatsits. In achieving these work goals, it has an established plan

of operation, and communication plays a major role in this plan. More specifically, each

of Typical’s employees has an assignment in the plan. For the plan to work, some

communicating must be done. In some of the assignments certain working information is

“needed. And so that all assignments may be performed as a harmonious and unified

effort, certain coordinating information must be communicated. All this information flow

is internal¬operational communication.

Clearly, Ram communicated more that fIrst meets the eye

Clearly, Ram communicated more that fIrst meets the eye. From the moment he left

home to the moment he looked at his watch, Ram was giving, receiving, or handling

information. Nothing that he did directly involved making whatsits, which, of course, is the

Typical Company’s main reason for being. Yet there is no question of the importance of

his activities to Typical’s operations. Obviously, Ram’s work assignment more directly

involves communi-cation that do many other assignments at Typical. But there are many

other communi-cation-oriented assignments in the company; and every Typical

employee’s workday is spotted in varying degrees with communication in one form or

another. If we were to trace the workdays of each Typical employee and combine our

findings, we would come up with an infInitely complex picture of the communication that

goes on at

Typical. We would see that communication truly plays a major role in Typical’s

operations.

Ram returns to his desk; but before he can resume his work

Ram thinks.

Ram returns to his desk; but before he can resume his work, Gopal walks up. “Have you

given any more thought to that reporting procedure change we talked about yesterday?”

Gopal asks.

Gopal is refelTing to a change he has had in mind for quite a few years. Last week he

asked Jamshed to do some research on the possibilities of the procedure. It was tllen

that Jamshed talked with Ram about the plan, and it was then that the two had another

one of their qualTels.

Gopal ‘s words bring Ram’s temper to a slow boil. “Gopal certainly is sold on that

asinine idea of Jamshed’s,” he thinks to himself. “Sure, it will save time now, but it won’t

give us much information. Bur you can’t fight city

hall.” Ram forces a smile which belies his inward feeiing as he responds; “Yes, I have,

Mr. Gopal. It’s a great idea. We should put it into effect right away.”

A few minutes later as Gopal walks away, Ram glances at his watch. It is 9:30 - half an

hour of a typical day.

Reviewing Ram’s activities, we find that most of what he does involves communication in

one way or another. Some of the forms of communication are easily recognized, such is

speaking, listening, reading, and writing. But some are more subtle. Primarily these are

the non-vebal types. One form is body motions. Another is the communication

message made by how far or close people stand when communicating. Then there are

the communi-cations we make through facial expressions. As we noted above, even

objects like desks and carpeting communicate, and so can people just by being seen. In

fact, it is impossible for people knowingly in the presence of each other not to

communicate.

Ram passes the water cooler where Jamshed and another worker are standing

Ram passes the water cooler where Jamshed and another worker are standing. Ram

does not care much for Jamshed. In fact, he has had a few run-ins with the man since

Jamshed joined Typical three weeks ago. Ram cot explain exactly what went wrong. At

the beginning Jamshed appeared to be a pleasant enough chap. He and Ram had lunch

together that first day. But soon after that time Jamshed started to find fault with some of

the work procedures in the department. He even pointed out some things that Ram could

do “to improve operations.” As

Ram saw it, there was little a neophyte like Jamshed could tell a man who had been on

the job for almost 20 years.

As Ram passes the cooler he waves his hand slightly in a feeble gesture of recognition.

Jamshed responds halfheartedly with a nod of the head. These simple gestures clearly

communicate how these men feel about each other Ram’s thoughts now are even more

hostile. He wonders how long it is going to take Gopal, his department head, to notice

how much time J amshed spends at the water cooler, in the toilet and at tea break.

Yesterday Ram saw Jamshed getting ready to go home for the day a full ten minutes

before quitting time. As Ram sees it, Gopal must like Jamshed. The two talk together a

lot, and Gopal has accepted a number of ‘J amshed’ s suggestions. But Gopal always

has had his favourites,

Then they will pass on their findings to the salesperson in the field

. Then they will pass on their findings to the salesperson in the field, who will

personally visit the customer to report the infOlmation.

Occasionally, such problems cannot be so easily solved. When a garment is defective,

for example, customer services will make a fair and speedy adjustment. Or if the defect

occurs frequently enough, a full-scale investigation may result. Possibly one or more of

the company’s technical specialists will be assigned to the problem, and they will spend

days or weeks or even longer periods searching for the answer to the problem. When

they find the answer, they will communicate this information through some fOlm of written

report.

As Ram opens the third envelope, he recognizes the

familiar off-colour brown of employee relations stationery. Inside he finds a printed

memorandum with an instruction sheet attached. This memorandum, signed by the

personnel manager, explains the new promotion plan Ram and his friends discussed on

the way to work. The instructions tell Ram to post the memorandum on the department

bulletin

. board. As Ram posts the memorandum, he reads the Company’s explanation. There is

much in it that he had not considered before, and some of the “facts” his friends used in

their arguments are strongly refuted. Ram is now somewhat confused, but he begins to

feel that the company may have a point or two.

On the way back to his desk, Ram passes the office of Sheela. Last week, Sheela was

promoted to chief order clerk- a job Ram had wanted. Ram observes Sheela sitting at

her large desk. He sees Sheela’s name printed on the door, and he observes the

carpeting on the floor. These objects clearly communicate to Ram a message of

Sheela’s success. Sheela is busily working and does not see Ram go by. “That stupid,

puzzled look on her face shows she doesn’t know what she’s doing,” Ram thinks “She

sits at her desk so high and mighty”. Sheela certainly communicates a lot to Ram, and

without saying a word.

reports programmed’ to serve the information needs

As a part of the Company’s data base, this information will

become a part of a number of reports programmed’ to serve the information needs of

Typical’s employees. Shipping depa11ment workers will get the information they need to

fill the order. Sales managers will receive summary rep0l1s of the activities of their

salespeople. Production planners will receive” the, inventory and product demand

information they need to work out production schedules. And the top executives will get

the overall activity rep0l1s which give them the performance information they need in

guiding Typical’s comse.

Among those in the shipping department who will receive the ordel; infOlmation is

ShaImila, the department secretary. One of Ms. Sharmila’s duties is to send the shipping

details to the customers in specially adapted acknowledgement ‘letters. The Typical

company uses a specially adapted letter rather than a routine from acknowledgement

because the firm recognizes the goodwill- building effect of making every

communication contact as favourable as possible. Obviously, individually composed

letters are expensive; so Ms. Sharmila cheats a

little by selecting from a half dozen basic form letters stored in the memory of her word

processor. Of course, the word processor will reproduce the letter and adapt it to the

one customer.

Contents of the next envelope Ram opens are not so positive as the first. This one is a

note from a Typical salesperson in the field who reports on a difficulty a customer is

having with a T-shirt. Using his computer terminal, Ram enters the pertinent facts into the

Company’s data base. There it will become a part of summary reports which may be

useful to production control and product design. Then Ram forwards this message

through interplant mail to the customer services depatlment. Here Typical’s

individualized attention will be given to the problem, for Typical knows that it is good

business .to keep its customers satisfied. Probably someone in customer services will

communicate with some of Typical technical personnel in an eff0l1 to find the cause of

the difficulty

Most of their talk is about trivial matters

Most of their talk is about trivial matters. They talk primarily to entertain and to while

away the time. There is joke or two, some comments about politics, a few words about a

coming cricket game, and some raves about the new receptionist. Such talk, of course,

is of little direct concern to Typical except perhaps as the talk affects the general

happiness and welfare of the company’s workers.

In time, the conversation drifts to subjects more pertinent to Typical and its operations.

Someone mentions a r.umour about a proposed change in promotion policy. Then Ram

and the others being in their own collection of rumours, facts, and opinions on the

subject. And in the process they form opinions and work up emotions concerning the

Company and its policies. This communication activity has little to do with manufacturing

garments, nor is it related to Ram’s duties at Typical. But it has affected Ram’s outlook,

and he just might not put out very much work for Typical today or any other day. He might

not trust Typical quite so much the next time the union conUllct problem comes up.

Wh,en the four reach the plant, the gate guard receives the message communicated by

the sticker on the windshield of the bus and waves the bus through. As Ram enters his

work area, he files past the time clock punches his card thereby communicates to the

payroll department a record of his attendance.

As Ram enters his work area, he engages in more social communication. He

exchanges “good mornings” with each of his colleagues, and he makes small talk with

two of them as they wait for the Company siren to communicate the message that it is

time for work to commence. Although this small talk with associates has

little to do with manufacturing garments, it helps to create a ‘happy and friendly attitude

among Ram and his co¬workers. And such an attitude can be conducive to

, productivity.

When the 9 o’clock siren blows, Ram begins his work s order clerk. The mor:ning mail,

ah’eady delivered t,o his desk, produces first an order from one of Typical’ salespeople

in the field. Using the computer telminal at his work station, Ram enters the pertinent

information: quantities, types, salesperson credited, sales district, purchaser

identification, and such.

Communication illustrated: Ram’s half hour

The role of communication in organized activities is perhaps best explained by

illustration of a real situation. By design, our illustration is both detailed and scant. It is

detailed because it is made up of illustrations of the minute and specific communication

events which occur in business. It is scant because at best it covers only a sample of the

almost infinite number of events.

For this review we could select any organization, as communication is vital to every

conceivable type. Our choice is the Typical Company, manufacturer of a line of ladies

garments. The Typical Company is moderately large, with scores of departments and

hundreds of workers doing a thousands and one tasks. It employs trams of salespeople

who sell the gatments to wholesalers all over the country. Like most companies in its

field. Typical works to help move its products from wholesaler to retailer and from retailer

to the final consumer. And it works to keep the consumer happy with the purchase. The

Typical Company is indeed typical.

Our review begins with the workday of Ram, a clerk in Typical’s order department.

Ram’s communication activities begin each day the moment he awakens. But for our

purposes we shall pick up Ram’s activities as he goes to work in a chartered bus with

three of his co-workers. Of course, Ram and the member of his chat.tered bus

communicate as they travel. Obviously, communication has a social use, and going to

work is a form of social occasion for Ram and his friends.

The high frequency of communication

Just how much communicating a business organization needs depends on a number of

factors. The nature of the business certainly is one. Some have much greater need to

communicate than do others. The organization plan of the company also affects the

volume of communication, for much of the information flow is provided by the structure.

Also, the people who make up the organization affect the volume of communication. As

we shall point out later, every human being is different. Each has different

communication needs and abilities. Thus, varying combinations of people will produce

varying needs for communication.

Although the communication needs vary by company, people in organizations

communicate more than most of us suspect. According to one generally accepted

estimate, between 40 and 60 per cent of the work time spent in a typical manufacturing

plant involves some phase of communication. Of cours, these percentages are only

averages. Some employees spend much more of their time communicating. In fact, the

higher up the organization structure the employee is, the more communicating he or she

is likely to do. Typically, top executives spend from 75 to 95 per cent of their time

communicating. Unskilled labourers, on the other hand, need to communicate little to do

their work.

Without question, communication is imp0l1ant to the business organization. Because it

is important, it stands to reason that business wants its communication to be well done.

These problems are not so pronounced with radio

These problems are not so pronounced with radio

because of the absence of visual images which can have a dominating effect on

television programmes. In faimess it should be said that the problems of providing

balanced and sensitive TV coverage are immense. The awareness of this and of British

achievements in this area has led the TV critic Milton Shulman to desclibe British TV as

‘the least worst in the world’. Readers can judge for themselves the extent to which the

media have taken note of the cliticisms made

in the Annan report in particular. The topic has been stressed because of the increasing

importance of television as 4 medium for communication, particularly in view of the

increasing availability of video-cassettes. The point that needs stressing above’ all

others is that one needs actively to evaluate the information with which one is presented

when the easiest course of action may be passively to accept itIf you are like most of us,

you spend more time communicating than doing anything else. Probably you spend a

large part of each day talking and listening. And when you are not talking or listening you

are likely to be communicating in other ways-reading, WIiting, gesturing, drawing. Or

perhaps you are just taking a infonnation by being, or feeling, or smelling. All of these

activities are forms of communication; and certainly you do them throughout most of your

conscious moments.

University Media Study Group in their monitoring of news bulletins

The Glasgow

University Media Study Group in their monitoring of news bulletins has been particularly

critical of news reporting. In their analysis of news bulletins in January 1975 they found

that the five industrial disputes in vehicle building, accounting for 21 per cent of the days

lost through strikes in the month, received 125 out of a total of 130 news rep0l1s of

strikes in the UK. They also established that in 22 news reports of the Glasgow dustcart

drivers’ unofficial strike in

the same year, the unofficial snikers were not represented in any of the 21 interviews

shown on, the national news during the 13 weeks of the dispute. One mayor may not

have had sympathy for the unofficial snikers, but viewers were not likely to be able to

make that judgment for themselves if one side of the case was not presented.

The criticisms of television coverage of news and CUlTent affairs reponing received

some endorsement in the Annan report on the future of broadcasting published in 1977.

Comment was made about the variability of current affairs presentation and for the need

for improvement in news Television News bulletins. This included the

observation that ‘Both BBC Television News and ITN, but particularly the former, could

be improved. News is

presented in too stereotyped a fashion; there is too little vaIiety, too little punch and there

are too few attempts to give brief explanatory comments. Whilst the Annan rep011 did

not endorse all the criticisms made of television reporting, they did point out a large

number of other weaknesses in some areas. These included the lack of understanding

of industrial life by some producers, the preference by others for presenting cunent

affairs in the style of a boxing promoter, the dangers of social insularity of television

producers, and camera bias.

Television as a source of information and its evaluation

The need to eVMuate carefully the accuracy and quality of information is not confined to

data that is generated within an organisation. All organisations collect much of their

information from external sources which are also subject to distortion. Television is an

increasingly important sow.ce of information for managers and it is appropriate to

comment about the problems of distortion which are now becoming apparent in this

area. One have become particularly aware of this in teaching industrial relations, and

refer to some of the problems of reponing in this area in order to make the general point

about the need to evaluate television carefully as an information source.

Industrial relations is an area that has been seized upon by the media generally, and

television in particular, for extensive coverage. People’s views and knowledge about the

subject can be as much influenced by media sources as anything else. This presents

difficulties, as increasingly evidence is emerging to suggest that the profile of industrial

relations presented by television in particular is not very representative. The obstacles to

balanced rep0l1ing are considerable and to a large extent stem from the conflict

between the obligation of television producers to present fair programmes and the

pressures on

them to catch the attention of audiences and attain high viewing figures

A person once explained to a friend that he was sony that

A person once explained to a friend that he was sony that

he had written him. a long letter. This was because he had not had time to write a short

one. The point is that it may require considerable eff0l1 and concentration to write ina

clear and simple manner. It also involves the writer being prepared to state what he

really means instead of concealing his real thoughts, or lack of real thoughts, behind a

smokescreen of words. Unfortunately people can easily be taken in by verbose or

complex explanations, believing that their failure to understand is because of their own

limitations rather than those of the writer. It may often be a more appropriate and

accurate assumption that, if a person hasn’t explained something clearly, the fault is with

their thinking rather than with the reader’s comprehension.

Sometimes matters have to be expressed in a precise technical way. and the use of a

particular language is unavoidable. This can be the case with legal documents where the

only way of achieving the necessary clarity is to use precise legal expressions. However,

even when technical language is used, there are differences between good and bad

expression. Whether technical language is used or not, there would seem to be no virtue

in explaining matters in a more complicated way than is necessary.

Written communication

The emphasis in the chapter so far has been on oral and visual communication. ut

much communication is written, and some consideration of the special features of

written communication is necessary. The main point that needs stressing is that wlitten

communication is one-way and the recipient, or recipients, have, for the time being at

least, to rely on the writer’s accuracy of expression. The rectangles experiment,

described earlier in the chapter, indicated some of the problems with one-way

communication. The type of language chosen may not be

convenient to the reader, and enol’S, ambiguities and complicated explanations cannot

be questioned until later, if at all. This means that the writer needs to give considerable

thought as to how best to express himself. An explanation that seems clear to him may

be far from clear to a reader.

Body language

The expressions, gestures and other body language that people may use, without

necessarily realising it, can be important cues as to what they really think.

Communication is not just imparting information: if often involves, or needs to involve,

understanding people’s attitudes and feelings which are not always clearly

expressed in words. In some cases people may even feel obliged to say the opposite of

what they really think. It is not uncommon, for example, for a person to say ‘how

interesting’ but in a tone of voice which indicates that they are in fact bored. An adage

which makes the point that people sometimes accidentally misrepresent themselves is

‘listen to what I mean not what I say’. As words can be an inadequate, or even a

misleading, guide as to what people really think, it can be important to look for other

cues as to people’s thoughts. A catalogue could be prepared of what particular physical

cues could mean¬fidgeting, that a person has other things on his mind; a glazed

expression, that a person doesn’t understand, and so on.

Wednesday, January 16, 2008

Budget is an estimate of future needs arranged according to an orderly basis

1. “Budget is an estimate of future needs arranged according to an orderly basis, covering some or all of the activities of an enterprise for definite period of time.

-- George R. Terry

2. “A Budget is a comprehensive and co-ordinated plan, expressed in financial terms, for the operations and resources of an enterprise for some specific period in the future”.

--James

3. “A Budget is a pre-determined statement of management policy during a given period which provides a standard for comparison with the results actually achieved”.

--Brown and Howard

4. “A financial and /or quantitative statement, prepared prior to a defined period of time, of the policy to be pursued during that period for the purpose of a given objective”.

--ICMA, England

Objectives of a Budget:

1. It directs the attention of all concerned to the attainment of a common goal.

2. It leads to the disclosure of organizational weakness. The budgets are compared with actual performance; and variances, if any, are investigated. This step helps in taking corrective and remedial measures.

3. It aims at careful control over the performance and cost of every function.

4. it Contributes to co-ordinated efforts of all departments in order to achieve an integrated goal. Budgets grow from bottom and are controlled from top-level.

Discuss the Limitations of Budgetary Control

Modern business world is full of competition, uncertainty and exposed to different types of risks. This complexity of managerial problems has led to the development of various managerial tools, techniques and procedures useful for the management in managing the business successfully. Budgeting is the most common, useful and widely used standard device of planning and control. The budgetary control has now become an essential tool of the management for controlling costs and maximizing profit. Costs can be reduced, wastage can be prevented and proper relationship between costs and incomes can be established only when the various factors of production are combined in profitable way. The resources of a business can be effectively utilized by efficient conduct of its operation. This requires careful working out of proper plans in advance, co-ordination and control of activities on the part of management.

Limitation of Budgetary Control:

Budgetary control is a sound technique of control. But it is not a perfect tool. Despite the appreciation, it has its own limitations which are as follows:

1. Budgets deal with future. Forecasting is necessary for budgeting. Forecasts and estimates are rarely cent per cent accurate. The success largely depends upon the degree of accuracy of the estimates.

2. Budgeting is time-consuming process. During the preparation period, the business conditions may change and estimates may go wrogn by that time.

3. The Successful operation and execution of budgets depends upon the efficiency of the executive personnel.

4. Budgetary control is essentially a tool of decision-making and it helps the management in taking sound decisions. But it cannot replace the management.

5. Budgeting necessitates the employment of specialized staff and this involves expenditure which small concerns may not afford.

6. A budget programme should be dynamic, capable of being adapted to changing conditions. But when budgets are prepared with pre-determined targets, there is a feeling rigid.

7. the success of the budgetary control largely depends upon willing co-operation or team work of all concerned. If there is no co-operation, the whole system collapses.

Organization:

The following are the essentials for a sound system of budgetary control:

1. Chart:

There must be an organizational chart to show the authority and responsibility of each executive of the firm. This will enable him to know his relationship with other executives. The budget director derives power from the chief executive, helps in co-ordination and drawing up of all budgets and suggests changes, if necessary. The sales manager, production manager, purchasing manager, personnel manager and accountant will prepare their budgets.

2. Budget Centre:

For the purpose of effective budgetary control, budget centres are defined. A budget centre may be a department of a section of the undertaking. Separate budgets are prepared for each department and the departmental head is responsible for carrying out budgets. Departmental heads should have effective control over the execution of the budget, to prevent unfavorable variation.

3. Budget:

In small firms, the chief accountant prepares the budgets and co-ordinates various activities. In big concerns, a Committee is appointed for this task. The Committee consists of various section heads, the chief executive and the budget controller. The budgets are prepared by section heads and submitted to the Committee for approval; changes are made, if necessary, and approved.

4. Budget Manual:

It is a document which sets out the responsibilities of persons engaged in the routine work. Budget manual lays down the objectives of the organization, responsibilities of all executives and the procedure to be followed for budgetary control. Duties, authorities, powers of each official of the different departments are clearly defined, so as to avoid conflicts amount the personnel. It also specifies different forms and records to be used for the purpose of budgetary control.

5. Key-Factor:

Key factor is also known as “Limiting factor” of “Governing Factor” which means this is the factor, the extent of whose influence must first be assessed, in order to ensure that the functional budgets are reasonably capable of fulfillment. The key factor may be , shortage of raw materials, non-availability of labour, limited sales, government restrictions etc. the key-factor is a limitation of production or sales. First locate the key-factor, before preparing the budget, as it influences all other budgets. For example, shortage of power supply leads to under-utilization of plant capacity. Therefore, the concern will have to first prepare a budget for plant utilization and later the other budgets say sales will be prepared.

Master Budget: A Master Budget is the summary budget. For the entire enterprise and embodies the summarized figures for various activities. This is also known as summary budget or finalized profit plan. This budget includes the budgeted position of the profit and loss as well as balance sheet. Master budget is prepared by the Committee and becomes a target for the company.

Describe the Advantage of Break-Even Chart

The important advantages are as follows:

1. Total cost, Variable cost and fixed cost can be determined.

2. B.E. output or sales value can be determined.

3. It shows cost and profits on different volumes of production. Planning and forecasting are made more effective.

4. Cost volume and profit relationship can be studied, and they are very useful to the managerial decision-making.

5. the best product mix can be selected.

6. It is useful for forecasting plans and profits.

7. It facilitates inter-firm comparison of profitability.

8. Total profit can be calculated.

9. It provides information in a more easily understandable form than the profit and loss account.

10. It is helpful for cost control

Saturday, January 12, 2008

opinion polr" means any service designed to secure information on public opinion regarding social

Indian Service Tax

Opinion Poll Services

Effective Date: 10/09/2004.

Authority: Finance (No.2) Act, 2004

Rate of Service Tax: 10% - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definitions: "opinion polr" means any service designed to secure information on public opinion regarding social, economic, political or other issues, [Section 65 (75a)]

"opinion poll agency"means any person engaged in providing any service in relation to opinion poll; [Section 65 (75b)]

Taxable service: Taxable service means any service provided to any person, by an opinion poll agency, in relation to opinion poll, [Section 65 (105) (zzs)]

Value of taxable service: Gross amount

Exemptions: See Notification No. 18/2004-ST, dt. 10/9/2004 at the end of the Chapter of "Airport Services".

  • Academic polls

  • Survey

  • Market Research

Person liable to pay: Opinion Poll Service provider.

Head of Account: To be issued.

Main text of Department Circular/TN

F.No. B2/8/2004-TRU, Date: 10/9/2004

08. Opinion poll services: Services provided by an opinion poll agency (i.e. any person providing that service) in relation to opinion polls are taxable under this category. Opinion poll means securing information on public opinions regarding social, economic, political and other issues. The term 'securing' would include activities like selecting the target groups, preparing questionnaires, gathering opinions from such target groups, collating their responses, drawing conclusions or analyzing trends and preparing reports based thereon. A similar service i.e. 'market research agency service' is taxable since 1998. However, that service includes conducting of market research in relation to products, services and utilities. Opinion polls conducted to secure information on economic issues do not include such market researches about specific products, services or utilities. Therefore, obtaining opinion of general public on economic issues like price rise, reaction of people to certain government or corporate policies etc., would fall under the category of opinion poll services while infonnation gathered in relation to specific products, services etc. would fall under 'market research agency service'.

Notification

Exemption

[Notification No. 18/2004-ST, dt. 10/9/2004]

For full text see under "Airport Services".

"on-line information and database access or retrieval" means providing data or information, retrievable

Indian Service Tax

On-Line Information And Database Access and/or Retrieval

Effective Date: 16/07/2001

Authority: Notification No. 4/2001-ST, dt. 9/7/2001 (for full text of Notification see under Broadcasting).

Rate of Service Tax: 8% from 14/5/2003-" (5% upto 13-5-2003). 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definition: "on-line information and database access or retrieval" means providing data or information, retrievable or otherwise, to a customer, in electronic form through a computer network, [Section 65(75)]

Taxable service: On line information and database access or retrieval service or both in electronic form through computer network in any manner provided by a commercial concern to a customer.

Value of taxable service: Gross amount charged from the customer.

Exemptions

  • E-Commerce transactions

  • Interconnection charges paid by one ISP to another ISP

  • Cyber Cafe - ENo. B-II/I/2000-TRU, dt. 9/7/2001 - Annexure IV

Person liable to pay: Commercial concern.

Head. of Account

SI. Code

SCCD

Minor-head

004400138

Online information & Database Access and/or Retrieval Service

00440152

Sub-head

00440013801

Tax Collection

00440153

113

Sub-head

00440013802

Other Receipts

00440154

116

Sub-head

00440013803

Deduct Refunds

00440155

115

Main text of Departmental Clrcular/TN

[Ministry's ENo. B.II/I/2000-TRU dated 9/7/2001 - Annexure IV]

  • As per Section 65(19)*, 1994, the term "On-line information and data base access or retrieval" means providing data or information, retrievable or otherwise, to a customer in electronic form through a computer network. The words "Data', "Information", "electronic form" and "computer .network" have the same meanings assigned to them in the Information Technology Act, 2000. As per Section 65(72)(zh). taxable service means any service provided to a customer, by a commercial concem, in relation to on-line information and database access or retrieval or both in electronic form.

  • The definitions given in the Information Technology Act, 2000 are as follows:

    "Data" means a representation of information, knowledge, facts, concepts or instructions which are being prepared or have been prepared in a formalised manner, and is intended to be processed, is being processed or has been processed in a computer system or computer network, and may be in any form (including computer printouts, magnetic or optical storage media, punched cards, punched tapes) or stored internally in the memory of a computer.

    "Information" includes data, text, images, sound voice, codes, computer programmes, software and data bases or micro film or computer generated micro fiche.

    "Electronic form" with reference to information means any information generated, sent, received or stored in media, magnetic, optical computer memory, microfilm, computer generated microfiche or similar device.

    "Computer network" means the interconnection of one or more computers through -

    • The use of satellite, microwave, terrestrial line or other communication media and

    • Terminals or a complex consisting of two or more interconnected computers whether or not the interconnection is continuously maintained.

  • In the context of this service, it may be relevant to point out the manner in which on-line information and database access/retrieval is generally made available. First, the function of what is commonly known as Internet Service Providers (ISPs). The ISPs provide telecommunication network or gateways necessary to access messages and databases and other information holdings of content providers. The second element is on-line information provision services which includes database services, provision of information on web-sites, provision-of on-line data retrieval services from data bases and other information, to all or limited number of users and provision of on-line information by content providers.

  • Internet service providers (ISPs) provide access to the web-sites through the computer network and the web-sites. Web-sites, in turn, provide the database or information. Some of the well-known ISPs operating in India are VSNL, MTNL, Satyam on-line, Bharti, Tata, RPG, HC1.-, Wipro, BPL, Mantra online, Dishnet. They normally charge the customers on the basis of usage of time

    (hours)They also provide dedicated lease lines on lump-sum payment basis. Clearly ISPs provide service in relation to on-line information and database access or retrieval. They are an integral part of the internet operations and without their service, the data or information can neither be accessed nor retrieved. They are, therefore, liable to pay service tax on the amount charged from the customers whether on usage time basis or on lease line basis.

  • As regards paid web-sites, a few examples ofIndian dot com companies are, Indiainformer.com, CIIonline.com, who charge the customer for certain specific information contained in their website either in advance or credit basis. They shall be also liable to pay service tax on the paid services provided by them. It is obvious that where the information is supplied free of charge, no service tax is payable.

  • Point for clarification:

A question has been raised as to whether e-commerce transactions (other than providing online information and data) are covered in the ambit of service tax. It is clarified that in e-commerce transactions, no service of online information and database access/retrieval is involved. Therefore, e-commerce transactions will not ordinarily be covered under the service tax net. Normally, the web sites do not charge .the surfers for information on sale of goods or services offered by them. If at all they do, service tax will be payable on the amount charged for providing the information.

Another point raised relates to applicability of service tax on inter­connectivity services provided by one ISP to another and the charges recovered for such services. It is understood that this is done to interconnect various networks so as to reach the server where the information is stored. It is informed that interconnection of one ISP to another is a commercial and technical arrangement under which service providers connect their equipment, networks and services to enable their customers to have access to the data or information. Through this arrangement, it is the customer of an ISP who ultimately receives on-line information and database access and/or retrieval service. Service tax on the amount charged from him is payable. Therefore, interconnection charges paid by one ISP to another ISP are not liable to service tax.

A question has also been raised whether the cyber cafes will be subject to service tax. It is clarified that the cyber cafes provide only the infrastructure such as computer terminals and internet connection. It is the ISP or web-sites who provide on-line access or retrieval of information. Therefore, cyber cafes are not liable to ray service tax. Services provided by ISP to cyber cafe are taxable and the ISP will pay the tax on charges realised from the cyber cafe.

Internet telephony

Cir.No. 54/3/2003-ST, 21/4/2003

N.B.: For full text see under "Telephone Service".

Clarification

Point No.2

Is data processing service covered under the category of "on line information and data base access or retrieval or both in electronic form through computer network, in any manner" as provided in sub-section (zh) of S. 90?

Reply

Yes - The Chairperson clarified that the Data processing service is covered under the category of "on line information and Data base access or retrieval or both in electronic form through computer network in any manner" provided to a customer by any commercial concern, is a taxable service as per clause 90(zh) of Finance Act, 1994.

(Authority: RAC on 30/12/2002, Mumbai-II Commissionerate)

market research agency"means any commercial concern engaged in conducting market research in any manner

Indian Service Tax

Market Research Agency

Effective Date: 16/10/1998.

Authority: Notification No. 53/98-ST, dt. 7/10/1998 (for full text of Notification see under'Architect').

Rate of Service Tax: 8% from 14-5-2003 (5% upto 13/5/2003). 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definition: "market research agency"means any commercial concern engaged in conducting market research in any manner, in relation to any product, service or utility, including all types of customised and syndicated research services; [Section 65(69)]

Taxable service: Market Research Agency providing service to a client in relation to market research of any product, service or utility, in any manner. Value of taxable service: The gross amount charged by such agency from the client for services rendered in connection with market research of any product, service or utility, in any manner.

Exemptions

  • Services rendered abroad.

  • Reimbursable expenses on actual basis.

  • Academic & Professional Research.

Person liable to pay: Market Research Agency.

Head of Account

S1. Code

SCCD

Minor-head

004400129

Market Research Agency Services

00440111

Sub-head

00440012901

Tax Collection

00440112

114

Sub-head

00440012902

Other Receipts

00440113

117

Sub-head

00440012903

Deduct Refunds

00440114

112

Questions & Answers

Q. 1 What is a Market Research Agency?

Ans. "Market Research Agency" is a commercial concern engaged in conducting market research in any manner, in relation to any product, service or utility, including all types of customised and syndicated research services.

Market research includes research based services in respect of consumer markets, industrial marketing, business to business marketing, social and rural marketing, etc. and is based on the requirements of the client. Such research services may be carried out by various techniques and may take the form of brand and advertising research. Such market research services include studies such as, strategic research & brand positioning development, new product development research, creating development research, brand name, logo, pack label research, corporate image, diagnostic market research, customer research, etc. Therefore, the market research services are of a very diverse nature and of a very wide variety.

Q. 2 What is the taxable service in case of services provided by a Market Research Agency?

Ans. Taxable service means any service provided to a client, by a market research agency in relation to market research of any product, service or utility, in any manner.

Q.3 What is the value of the taxable service in case of services provided by Market Research Agency?

Ans. Value of the taxable service in relation to the service provided by a market research agency to a client, is the gross amount charged by such agency from the client for services rendered in connection with market research of any product, service or utility in any manner.

Q. 4 Whether the Service tax is payable by the market research agencies on services rendered to the advertising agencies who has subcontracted the work to them?

Ans. Yes, in the case where a market research agency is providing the service to the advertising agencies, who have commissioned its services on behalf of the client, the market research agency would be required to pay service tax on services rendered by it to an advertising agency. The advertising agency would also liable to pay service tax on the amount billed to its client, but for advertising services.

Q. 5 Is service tax payable on the reimbursable/out-of-pocket expenses charged to the client on actual basis?

Ans. No. The charges billed to the client by Market Research Agency on account of out of pocket expenses which are reimbursable on actual basis, such as, travelling, boarding and lodging expenses are not subject to service tax. In this respect, the service tax assessee may be required by the jurisdictional officers to provide documentary evidence substantiating his claim for abatement from the gross amount received from the client for services rendered.

Main text of Departmental Circular/TN

[TN No. 116/98-ST, dated 15/10/1998 of Hyderabad Commissionerate]

6.1 Under Section 65(25)* a "market research agency" means any commercial concern engaged in conducting market research in any manner, in relation to any product, service or utility, including all types of customised and syndicated research services. Market research inter alia, includes research based services in respect of consumer markets, industrial marketing, business to business marketing, social and rural marketing etc. and is based on the requirements of the client. Such research services may be carried out by various techniques and may take the form of brand and advertising research. Such market research services include studies such as, strategic research & brand positioning development, new product development research, creative development research, brand name, logo, pack label research, corporate image, diagnostic market research, customer research etc. Thus, it is apparent that the market research services are of a very diverse nature and of a very wide variety.

6.2 A question has been raised as to whether service tax is payable by a market research agency in case an advertising agency commissions a market research for or on behalf of a client of the advertising agency, as it would result in double or multiple taxation (as the advertising agency is also liable for paying service tax on services rendered by him to his client). It is clarified that in the instant case a market research agency would be required to pay service tax on services rendered by it to an advertising agency, and the advertising agency is also liable to pay service tax on the amount billed to its client for advertising services. As stated earlier in para 5.6, service tax is not required to be paid by a sub-contractor only in cases where service tax has been paid by the principal on services rendered by him to his client and provided further that the sub­contracting in question is in respect of the same service category.

6.3 An issue has been raised whether service tax is payable in respect of services rendered to foreign clients in India, and in respect of such services rendered abroad. It is clarified that service tax is payable on all taxable services rendered in India, whether to an Indian or foreign client. However, services rendered abroad shall not attract service tax levy as service tax extends only to services provided within India.

6.4 Another concern that has been raised is whether service tax is payable on the reimbursable/out-of-pocket expenses charged to the client on actual basis. As regards charges billed to the client on account of out of pocket expenses which are reimbursable on actual basis, such as, travelling, boarding and lodging expenses is concerned, the same are not subject to service tax. In this respect, the service tax assessee may be required by the jurisdictional Commissioner of Central Excise to provide documentary evidence substantiating his claim for abatement from the gross amount received from the client for services rendered. Similar dispensation in respect of reimbursable/out-of-pocket expenses charged to the client on actual basis is also available in respect of other services.

Renting out of premises to participants of trade fair and Election Commission - 2004 (164) ELT 163 (Tri-Del)

Indian Service Tax

Manpower Recruitment Agency

Effective Date: 07/07/1997.

Authority: Notification No. 23/97-ST, dt. 02/07/1997 (for full text of Notification see under'Consulting Engineer').

Rate of Service Tax: 8% from 14/5/2003 (5% upto 13/5/2003). 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definition: "manpower recruitment agency"means any commercial concern engaged in providing any service, directly or indirectly, in any manner for recruitment of manpower, to a client; [Section 65(68)]

Taxable service : Placement services by a man power recruitment agency in relation to the recruitment of manpower in any manner.

Value of taxable service: Gross amount charged by manpower recruitment agency from a client for recruitment of manpower services rendered in any manner.

Exemptions

  • Renting out of premises to participants of trade fair and Election Commission - 2004 (164) ELT 163 (Tri-Del)

  • Expenses reimbursed on actual basis

  • Employment Exchanges

  • Civil/electrical/labour contractors

  • Educational & Professional institutions Person liable to pay: Manpower Recruitment Agency.

Head of Account

Sl.Code

SCCD

Minor-head

004400116

Manpower Recruitment Services

Sub-head

00440011601

Tax Collection

00440060

114

Sub-head

00440011602

Other Receipts

00440061

117

Sub-head

00440011603

Deduct Refunds

00440062

112

Questions & Answers

Q.1 What is a " Manpower Recruitment Agency"?

Ans. A "Manpower recruitment agency "is any commercial concern engaged in provHing any service, directly or indirectly, in any manner for recruitmeilt of manpower, to a client.

Q.2 What is the Taxable Service in case of Man Power Recruitment Agency?

Ans. The taxable service rendered by a manpower recruitment agency is any service provided to a client, by a manpower recruitment agency in relation to the recruitment of manpower in any manner.

The coverage of the term "manpower recruitment agency" is wide and includes within its ambit, the services provided by an agency from the primary stage of building a database of manpower for different categories of personnel employment, determining manpower requirement for the client, preliminary identification, short-listing and screening of prospective candidates, providing specialists for interviewing prospective candidates, arranging for their interviews at each stage; placing advertisements for recruitment of manpower in the print or electronic media, etc. In short, Service Tax on manpower recruitment agency covers within its fold, the entire gamut of services provided by a man-power recruitment agency to a client from the initial stage of selecting/identifying man-power required for any prospective employment, till the stage of actual selection for the same.

Q.3 What is the value of Taxable Service in relation of ManPower Recruitment Agency?

Ans. The value of taxable service in relation to service provided by a Manpower recruitment agency to a client is the gross amount charged by such agency from a client in relation to the recruitment of manpower in any manner.

However, the expenses incurred by the manpower recruitment agency on behalf of the client which are reimbursed on actual basis are not includible in the value of taxable services. The manpower recruitment agency is required to substantiate such actual expenses on the basis of documentary evidence. In case the manpower recruitment agency is billing the client on the basis of a lump sum, any deductions from the same on account of reimbursable expenses, for the purposes of determining the value of taxable service may be permitted on the basis of documentary evidence adduced by the agency.

Q. 4. What is the procedure to be followed if the payment is received at different stages by the Manpower Recruitment Agency?

Ans. Normally the manpower recruitment agency receives remuneration from the client for the services rendered by it as per the stipulations in the contract/agreement. The payment from the client is received at different stages, based on the completion of work/service at each stage. The manpower recruitment agency shall be required to pay Service Tax on the payments received at each stage from the client by the 25th of the succeeding month. Subsequent modifications, if any, in the bills raised to the client at the time of final payment may be allowed after verification.

Q. 5 Whether the labour contractors, who supply their own labour on contract, would be covered under the definition of Manpower recruitment Agency?

Ans. No, since the labour contractors supply their own labour on contract, they do not help their client in recruitment of labour in any way. Therefore, the supply of labour on contract is not covered under the definition of Manpower recruitment Agency.

Q. 6 Whether 'trusts' providing the services of Manpower Recruitment Agency are liable to pay the Service Tax ?

Ans. Law as it stands now, does not provide any exemption to trusts from payment of Service Tax. If they are getting paid for providing the service, they are liable for payment of Service Tax on the amount, which, they have received from their client and are to be treated as any other .service provider.

Do academic institutions, recruiting their students for industrial establishments on receipt of payment, come under the category of manpower recruitment agency?

Q. 7 Do academic institutions, recruiting their students for industrial establishments on receipt of payment, come under the category of manpower recruitment agency?

Ans. Yes, the institutions which are performing the tasks of commercial concern assisting in Man power Recruitment, fall within the scope of the definition of term 'Manpower Recruitment Agency' and become liable to pay Service Tax.

Main text of Departmental Circular/TN

TN No. 53-CE (ST)/97, date: 04/07/1997 of New Delhi Commissionerate

3.1 As per Section 88 of the Finance Act, 1997 manpower recruitment agency means any commercial concern engaged in providing any service, directly or indirectly, in any manner for recruitment of manpower to a client. The taxable service rendered by a manpower recruitment agency is defined as any service provided to a client, by a manpower recruitment agency in relation to the recruitment of manpower in any manner. The rate of service tax is 5% and the value of taxable service in relation to service provided by a manpower recruitment agency to a client shall be the gross amount charged by such agency from the client in relation to the recruitment of manpower in any manner.

3.2 It would be pertinent to note that the coverage of the term manpower recruitment agency is wide and shall include within its ambit the services provided by an agency from the primary stage of building a database of manpower for different categories of personnel employment, whether white collar or blue collar, whether for employment in India or overseas; determining manpower requirement for the client, preliminary identification, short listing and screening of prospective candidates, providing specialists for interviewing prospective candidates, arranging' for their interviews at each stage; placing advertisements for recruitment of manpower in the print or electronic media etc. In short,

service tax on manpower recruitment agency shall cover within its fold the ptire gamut of services provided by a manpower recruitment agency to a client rom the incipient stage of selecting/identifying man-power required for any prospective employment, till the stage of actual selection for the same. It may !e noted that in certain cases such as where a person approaches a manpower ~quirement agency for being employed in a suitable position abroad, as normally lappens in case of employment in Gulf countries, the prospective candidate for employment become the client for purposes of service tax.

3.3 Service Tax on manpower recruitment agencies shall be the gross lmount charged to the client for services rendered in relation to the recruitment of manpower excluding the amount incurred by the manpower recruitment agency on behalf of the client towards expenses which are reimbursed on actual basis. The Commissioners may selectively, in doubtful cases require the manpower recruitment agency to substantiate such actual expenses on the basis of doumentary evidence. In case the manpower recruitment agency is billing the client on the basis of a lump sum, any deductions from the same on account of reimbursible expenses, for the purposes of determining the value of taxable service may be permitted on the basis of documentary evidence adduced by the agency.

3.4 Normally the manpower recruitment agency receives remuneration from the client for the services rendered by him as per the stipulations in the contract/agreement between them. The payment from the client is received at different stages, based on the completion of work/service at each stage. The manpower recruitment agency shall be required to pay service tax on the payments received at each stage from the client by the 15th of the succeeding month. Subsequent modifications, if any, in the bills raised to the client at the time of final payment may be allowed after verification.

Labour contractor - Exempted

Man Power Recruitment Agency's Service

Point No. 4.

Most of the manufacturers in the Trade are entrusting a work to a contractor to a mutually agreed amount to complete the work viz. loading of cargo, unloading of cargo, packing of finished goods etc. The contractor brings his own men on his account and completes the entrusted work by using his own labour. The labourer is no way connected to the Trade/Management and will not come in the pay roll of management. On completion of the entrusted work, the contractor receives the agreed amount from the management viz. Manufacturer/Trader.

Therefore, it is to be clarified whether the contract work taken by a contractor to a mutually agreed amount will fall under Man Power Recruitment Agency.

Reply

As per Section 65(68) of the Act, Man Power Recruitment Agency means any commercial concern engaged in providing any service, directly or indirectly, in any manner of recruitment of man power, to a client.

The DGST, Mumbai has clarified vide question and answers (2000-2001) No. 7.5 that the labour contractors, who supply their own labour on contract, would not be covered under the definition of Man Power Recruitment Agency. Since, the labour contractor supply their own labour on contract, they do not help their client in recruitment of labour in any way. Therefore, the supply of labour on contract is not covered under the definition of Man Power Recruitment Agency.

[Commissioner of Central Excise, Madurai-II, Minutes of the RAC meeting held on 29/8/2003].

In exercise of the powers conferred by Section 93 of the Finance Act, 1994 (32 of 1994), the Central Government

Indian Service Tax

Notifications

Exemption to Religious Place

[Notification No. 14/2003-ST, dt. 20/6/2003]

In exercise of the powers conferred by section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services provided to any person by a mandap keeper for the use of the precincts of a religious place as a mandap, from the service tax leviable thereon, under section 66 of the said Act.

Explanation:-For the purpose of this notification, "religious place" means a place which is meant for conduct of prayers or worship pertaining to a religion.

2. This notification shall come into force on the 1st day of July, 2003.

Partial exemption to Catering Service

[Notification No. 12/2001-ST, dated 20/12/2001]

In exercise of the powers conferred by Section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service provided by a hotel as mandap keeper in such cases where services provided include catering services, that is, supply of food along with any service in relation to use of a mandap, and the bill issuedforthis purpose indicates that it is inclusive of charges for catering servicesl[from so much of the service tax leviable thereon under Section 66 of the said Act, as is in excess of the service tax calculated on a value which is equivalent to sixty per cent of the gross amount charged from the client for the said taxable service].

2[Provided that the said exemption shall not apply in such cases where­

(i) credit of duty paid on inputs or capital goods has been taken under the provisions of the Cenvat Credit Rules, 2004 ; or

(ii) such hotel providing service as mandap keeper has availed the benefit under the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. l2/2003-ST, dt. 20/6/2003 [GSR 503(E), dt. 20/6/2003]].

2. This notification shall have effect upto and inclusive of 31st day of March 2002.

Explanation:-For the purposes of this notification,

(i) the expression "food" means a substantial and satisfying meal;

(ii) the expression "hotel" means a place that provides boarding and lodging facilities to public on commercial basis.

1. Subs. for "from the whole of the service tax leviable thereon under Section 66 of the said Act" by Noti. No 8/2004-ST, dt. 9/7/2004.

2. Inserted by Noti. No. 12/2004-ST, dt. 10/9/2004.

Rate of duty

[Notification No. 21/97-ST, dated26/6/1997]

In exercise of the powers conferred by Section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts so much of the service tax leviable on a mandap keeper, as is in excess of the amount of service tax calculated on sixty per cent of the gross amount charged from the client by the mandap keeper, for the use of mandap including the facilities provided to the client in relation to such use and also for the catering charges:

1[Provided that the said exemption shall apply in such cases where­

(a) such mandap keeper also provides catering services, that is, supply of food and the invoice, bill or challan issued for this purpose indicates that it is inclusive of charges for catering service; and

(b) no credit of duty paid on inputs or capital goods has been taken under the provisions of the Cenvat Credit Rules, 2004; and

(c) such mandap keeper has not availed the benefit under the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 12/2003-Service Tax, dated the 20th June, 2003 [G.S.R. 503 (E), dated the 20th June, 2003].]

2. This notification shall come into force on the 1st day of July, 1997.

Explanation:-For the purposes of this notification, the expression "food" means a substantial and satisfying meal.

Case Law

Distinction between "official function", "social function" and "business function" - 2001 (133) ELT 36 (Mad.).

Constitutional validity upheld - 2001 (133) ELT 36 (Mad.).

Letting out mandap (with or without other services) is a service.TamilNadu Kalyana Mandapam Association vs. Union of India,2004 (17) ILD 82 = 2004 (167) ELT 3 (Se).

"Mandap” means any immovable property as defined in section 3 of the Transfer of property Act, 1882(4 of 1882)

Indian Service Tax

Mandeep Keeper

Effective Date: 01/07/1997.

Authority: Notification No. 19/97-ST, dt 26/06/1997 (for full text of Notification see under ‘Air Travel Agent’)

Rate of Service Tax: 8% from 14/5/2003 (5% upto 13/5/2003). 10% from 10/9/2004-Cess 2% of 10% = 0.2.Total ST = 10.2%.

Definition: "Mandap” means any immovable property as defined in section 3 of the Transfer of property Act, 1882(4 of 1882) and includes any furniture, fixtures, light fittings and floor coverings therein let out for a consideration for organising any official, social r business function; [Section 65(66)].

"Mandeep Keeper " means a person who allows temporary occupation of a mandeep for a consideration for organising any official, social or business function, [Section 65(67)]

Taxable Service: Mandeep service by a Mandeep keeper in relation to use of Mandeep and also the service, if any rendered by him as a catere.

Value of taxable service: Gross amount charged by Mandeep keeper from client for the use of mandeep including the facilities provided to the client in relation to such use and also the charges for catering, if any.

Exemptions

Exemption 1- See Notification Nos. 21/97-ST, dt. 26/06/1997 and 12/2001-ST, dt. 20/12/2001

Exemption 2- (Para 2.7 of Cir.No. 59/8/2003-ST, dt.20/6/2003):

2.7 Mandeep Keeper Service:

Religious places like parish hall temples etc provide services as mandeep keeper for hosting of social and religious functions. Though such services are liable to service tax under the mandeep keeper services, vide notification No.14/2003-Service Tax,20thJune, 2003 services provided by the religious centres as mandeep keeper in their precincts have been exempted from service tax.

  • Religious functions like Marriages, Brahmopadesha – 2003 (157) elt 182 (Tri-Bang).

  • Religious places like parish hall temples etc., which provide services as mandeep keeper for social and religious functions.

    Para 2.7 of Cir.No.59/8/2003 ST dt. 20/6/2003 and Notfn. No. 14/2003-ST dt.20/6/2003

  • Abatement of 40% if Mandeep keeper also provides catering services- Notfn.No. 21/97-ST, dt. 26/6/1997.

  • Art. Galleries – Cir. No.42/5/2002-ST, dt.29/4/2003

Person liable to pay: Mandeep Keeper

Head of Account

SI. Code

SCCD

Minor-head

004400110

Mandeep Keeper Services

Sub-head

00440011001

Tax Collection

00440035

118

Sub-head

00440011002

Other Receipts

00440036

111

Sub-head

00440011003

Deduct Refunds

00440037

110

Questions & Answers

Q. 1. What is a Mandeep and who is a "Mandeep Keeper”?

Ans. "Mandeep” is any immovable property as defined in Section 3 of the Transfer of Property Act, 1882 and includes any furniture, fixtures, light fittings and floor coverings therein, let out for consideration for organising any official, social or business function. "Mandeep Keeper” is "a person who allows temporary occupation of a mandeep for consideration for organising any official social or business function”.

The meaning of ‘mandap’ is very wide in its scope and includes all immovable properties let out for organising social, official or business functions. It includes places like kalyana mandaps or marriage halls, banquet halls, conference halls, etc. Hotels and restaurants providing any such facility within their premises for organising any social, official or business function shall also be obviously included in the coverage of Service Tax. Therefore, the levy of Service Tax is attracted in all these cases.

The definition also includes mandaps, which are located or situated within the premises of any public place of worship such as temple, church, etc. and let out on charges.

Q. 2. What is the taxable service in case of a Mandeep Keeper?

Ans. In case of a Mandeep Keeper, the taxable service are the services rendered to a client by mandap keeper in relation to the use of mandap in any manner including the facilities provided to the client in relation to such use and also services, if any rendered as a catere.

Q. 3. What is the value of taxable service in case of a Mandap Keeper?

Ans. The value of the taxable service means the gross amount charged by the mandap keeper from the client for use of the mandap keeper including the facilities provided to the client in relation to such use and also the charges for catering if any.

The Service Tax would be leviable not only on the hire charges for the mandap but also charges for electricity, whether on actual basis or otherwise, charged to the customer. The tax is to be collected on the whole amount even if separate bills are issued one for the rental and the other for electricity charges. The mandap keeper may also bill the client for other services rendered by him such as charges for providing furniture, fixtures, lighting fittings, vessels, crockery, cutlery, etc. All these charges are includible in the value of taxable service for the levy of Service Tax.

Q. 4. What is the value of taxable service where Mandap keeper is also providing Catering service?

Ans. Where a mandap keeper also provides catering services, that is supply of food, in addition to the letting out of the mandap and charges the customer for supply of food, an abatement of 40% of the total amount charged is provided while computing the value of the taxable service. This. abated value would be the value of taxable service in such cases. In other words, Service Tax will be leviable on 60% of the total amount billed in such cases. This abatement would generally apply in the case of hotels, clubs, also acting as mandap keepers.

Q. 5. Would sports stadia, Gymkhana etc. fall within the purview of Mandap?

Ans. Yes, they would, if they let out their premises for a consideration for holding official, social or business functions.

Q. 6. Is Service Tax to be paid on the elements of sales tax and expenditure tax etc. ncluded in the gross bill raised to the client by Mandap Keepers?

Ans. No. Since Sales Tax, Expenditure Tax are statutory levies, they cannot be included in the value of the taxable services. Any calculation of the Service Tax has to be on the value of service excluding the statutory taxes.

Q. 7. Is activity of temporary renting out of studio premises for the purpose of shooting of Film/T.V. serials liable for payment of Service Tax under the category of service provided by Mandap Keeper?

Ans. The activity of temporary renting out of studio premises for the purpose of shooting of filmIT. V serials would not be covered under the category of service provided by Mandap Keeper but would be covered under the category of Video Tape Production Service

Q. 8. Would renting of Banquet Hall for the purpose of conducting the Seminars and conferences fall within the definition of taxable service in case of" Mandap Keepers' ?

Ans. Yes. The renting of Banquet halls for conducting the Seminars/conferences would fall within the ambit of the definition of the taxable service provided by a Mandap Keeper as such seminars/conferences are considered as officia1/business functions.

Q. 9. Is Service Tax payable by the Clubs ,who are making their premises available to their members only, for organising social function such as marriage, birth day parties etc.?

Ans. Yes. The services provided by Clubs, by way of making the premises available to their members for organising social functions on payment of feel charges, would fall under the category of service provided by Mandap Keeper and would be liable to payment of Service Tax.

Q. 10. Do hotels and restaurants fall within the meaning of the word "Mandap" for the purposes of levy of Service Tax on services rendered by Mandap Keeper and is Service Tax attracted when the hotel/ restaurants let out their halls, rooms, etc. for social, official or business functions?

Ans. Yes. Hotels and restaurants would fall into the definition of Mandap if they let out their banquet halls, rooms, gardens etc. for holding / organising any marriages, parties, conferences, show and other such socia1/business functions.

Q. 11. Is Service Tax attracted in cases where premises and! or connected facilities are let out on rent to clubs and cultural organisations for the purPoses of holdings programmes relating to dance, drama & Music?

Ans. Yes. Renting out hall etc. for purpose of holding a dance, drama & Music programmes or competition is chargeable to Service Tax, as the same are social functions.

Q. 12. Apart from providing temporary occupation of "Mandap" for any official, social or business function, if a "Mandap Keeper" provides it for stay of Baraatis, is he liable to levy of Service Tax on such service?

Ans. Stay of "Baraatis"is part of the marriage function, which is a social function, and hence would attract Service Tax if the mandap is let out for a consideration.

Q. 13. Whether the charges of vessels, furniture, decoration etc, provided by the third party other than the Mandap Keepers are includible in the taxable value?

Ans. The charges of vessels, furniture, decoration etc, provided by the third party other than the mandap keepers are not includible in the taxable value if the mandap keeper is not associated with such supply in any way since the said facility is not provided by the mandap keeper.

(Authority: Definition of taxable service at clause (m) of Section6S(48) of chapter V of the Finance Act 1994)

Q. 14. In summer oclidays or in other holidays the private Schools / Municipal schools and colleges are letting their schools / college buildings for

Marriage functions. Do they come under the Mandap Keeper / Are they liable to pay Service Tax?

Ans. Marriage function is also a social function and hence the letting out of school /college/buildings/open land would attract Service Tax under the category of Mandap Keeper.

Q. 15. Whether donations accepted /received as consideration for letting out the Mandap is liable for Service Tax?

Ans. Donation is also a form of consideration for letting out the "Mandap” and, hence would attract Service Tax.

Q. 16. Whether Cinema Theatres showing Premier shows of movies will be liable for payment of Service Tax under Mandap Keeper Category if the theatre is given on rent?

Ans. Screening of feature films in cinema theatres is not an official, social or business function and, therefore, no service tax would be leviable under the category of "Mandap Keeper” for giving the theatre on rent for showing premier shows of movies which is a part of the entire process of making and relating the feature films in cinema theatres.

Q. 17. Whether an open land or ground let out for consideration for organising any social or official or business function can be considered as a Mandap and appropriate tax collected?

Ans. Even the open land/ground is to be treated as an ‘immovable property’ as per the definition given in Sec.3 of Transfer of property Act, 1882 and hence the above premises let out for consideration also falls under the category ‘Mandap’ for the purpose of key of levy of Service Tax.

Q. 18. Whether the pavillion owned by a Govt. Undertaking would be covered under the definition of mandap or not? Whether such organisation is covered under the category of Mandap Keeper by virtue of Notification No. 19/97-ST dt. 01/07/97?

Ans. The pavillion owners, either private or a Govt. under-taking, are liable to pay service tax under the category "mandap keeper” for hiring out space/stall, e.g a trade fair, to individuals who organise their business function as per their own requirement.

Q. 19. Whether the services provided by a Mandap Keeper from a religious place are liable for Service Tax?

Ans. The services provided by a Mandap Keeper from the precincts of a religious place are exempted from payment of Service Tax.

[Source CBEC Website]

Q. 8.1 Whether the services provided by a Mandap Keeper from a religious place are liable for Service Tax?

Ans. The services provided by a Mandap Keeper from the precincts of a religious place are exempted from payment of Service Tax.

[Source: Directorate of publicity and public Relations, Customs & Central Excise, New Delhi, October, 2003].

Main text of Department Circular/TN

[TN No. 6/97-Service Tax, date : 01/07/1997 of Mumbai]

2.1 As per clause (19) of Section 65 of the Finance Act, 1994, "Mandap” means any immovable property as defined in section 3 of the Transfer of Property Act, 1882 and includes any furniture fixtures, light fittings and floor coverings therein, let out for consideration for organising any official, social or business function. " Mandap Keepers” has been defined as " a person who allows temporary occupation of a mandap for consideratrion for organising any official, social or business function”., It may kindly be noted that the definition of mandap is very wide in its coverage and covers all immovable properties let out for organising social, official or business function. It includes within its scope places like kalyana mandaps or marriage halls, banquet halls, etc.,Hotels and resturants providing any such facility within their premises for organising any social, officials or business function shall also be obviously included in the coverage of service tax. Therefore, the levy of the service tax will apply in all these cases.

2.2 The taxable service has been defined as services rendered to a client by mandap keeper in relation to the use of mandap in any manner including the facilities provided to the client in relaiton to such use and also services, if any rendered as a caterer and the value of the taxable service menas the gross amount charged by the mandap including the facilities provided to the client in relation to such use and also the charges for catering, if any.

2.3 A number of points have been raised by the associations representing mandap keepers with respect to the levy of service tax on their activities. These are discussed in the ensring paragraphs.

2.4 The person responsible for collecting the service tax will be "mandap keeper”. The service tax would fall not only on the hire charges for the mandap but also charges for electricity, whether on actual basis or otherwise, charged to the customer therefore , it may be ensured that the tax is collected on the whole amount even if separate bills are issued one for the rental and the other for electricity charges. The mandap keeper may also bill the client for other services rendered by him such as charges for providing furniture, fixtures, lighting fittings, vessels, crockery,cultery, etc. all these charges are includible in the value of taxable service for the levy of service tax.

2.5 Where a mandap keeper also provides catering services, that in supply of food, in addition to the letting out of the mandap and charges the customer for supply of food, and abatement of 40% of the total amount charged has been provided while computing the value of the taxable service. This will be deemed to. be the value of taxable service in such cases. In other words, service tax will be leviable on 60% of the total amount billed in such cases (vide notification No. 21/97-Service Tax, dated 26th June, 97). This mainly happens in the case of hotels, clubs etc.

2.6 Sometimes it may happen that the booking made for the mandap is subsequently cancelled. In such cases, the question of levying service tax does not arise as no service has been rendered. It may kindly be noted that the tax has to be paid not at the time of booking of the mandap but when the service is actually rendered and the bill raised by the mandap keeper to the client.

2.7 It may also be noted that in view of the definition of mandap as discussed in para 2.1 above, even if the mandap is located or situated within the premises of any public place of worship such as temple, church, etc. and charges are collected for letting out of the mandap, the tax would be applicable.