As per Section 65(64)"maintenance or repair"means any service provided by

Indian Service Tax

Maintenance Or Repair Services

Effective date: 1/7/2003.

Authority: Notification No. 7/2003-ST, dt.20-6-2003(For full text see under "Business Auxiliary Service").

Rate of Service Tax: 8% upto 9/9/2004. 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definition

As per Section 65(64)"maintenance or repair"means any service provided by­

"(i) any person under a maintenance contract or agreement or (ii) a manufacturer or any person authorised by him in relation to maintenance or repair or servicing of any goods or equipment, excluding motor vehicle."

Taxable Service: Any service in relation to any service or repair at any maxicab.

Value of Taxable Service: Gross amount charged for such service cost of parts, accessories, consumables like coolants, lubricants is excluded

Exemptions

• Cost of parts, accessories, consumables like coolants, lubricants - Cir. No. 65/14/2003-ST, dt. 5/11/2003

• Maintenance of roads

• Contracts entered before 1.7.2003 - Notifn. No. 11/2003-ST, dt.20/6/2003rescinded by Notfn. No. 7/2004-ST, dt. 9.7.2004.

• Free testing, repair camps

Person liable to pay: Authorised Service Station

Head of A/c: Tax Collection - 00440245, Other Receipts - 00440246, Deduct Refunds - 00440247.

Questions & Answers

2. Maintenance & Repair Service:

Q .2.1 In case of maintenance contract entered prior to March, 2003 for one year on receipt of the service charges for the whole year, it appears illogical to demand collect service tax on the services rendered prior to14/5/2003as the client has already paid the amount. Who will pay the service tax and how?

Ans. There are cases where maintenance contracts are entered into for a period of more than one year. Vide Notification No. 11/2003-Service Tax, dt.20/6/2003,for maintenance contracts entered into prior to 1st July, 2003, exemption has been provided to that part of the value of service for which bill/invoices have been raised and the amount has actually been received prior to the 1st July, 2003. For such contracts, all subsequent payments or payments made against invoice raised subsequent to the 1 st July, 2003 will be chargeable to service tax.

Q.2.2 Whether service tax is applicable on maintenance and repair services provided by persons other than authorised service centres of companies?

Ans. "Maintenance or repair" means any service provided by:

• any person under a maintenance contract or agreement or

• a manufacturer or any person authorised by him in relation to maintenance or repair or servicing of any goods or equipments, excluding motor vehicle. Therefore, service tax is applicable on maintenance and repair services provided by all such persons.

Q.2.3 If there is a total sub-contract of the service, whether sub-contractor is supposed to take out a registration and discharge the tax liability?

Ans. The sub-contractor need not take a registration under Service Tax. In all such cases, Service Tax is to be paid by main service provider.

Q.2.4 Whether maintenance and repair provided without any contract is taxable?

Ans. The maintenance or repair service undertaken under a maintenance contract or agreement is only chargeable to Service Tax.

Q.2.5 Whether Annual Maintenance Contracts (AMC) for maintenance of roads are excluded from Service Tax?

Ans. As roads are neither goods nor equipment, the AMC for roads would not be covered under Service Tax.

Q.2.6 Whether Service Tax on maintenance and repair would be charged in cases where during the guarantee period, the services are provided to the buyer of the goods while the payments for the same are received from the supplier of the goods?

Ans. Irrespective of the fact that the receiver of the service is different from the person making payments for such services, the Service Tax is leviable on the service provided towards maintenance and repair. Therefore, for the services provided during the warranty period by the dealer or any other authorized person, Service Tax would also be leviable on any amount received by such dealer or such other authorized person from manufacturer of such goods.

Q.2.7 Maintenance or repair services rendered under contracts entered into prior to 1/7/2003 are exempted from Service Tax if the bills are raised, and paymert also made, prior to 1/7/2003. Whether Service Tax would still be chargeable in cases where through the bills are raised or payment made, after 1/7/2003 but services were rendered prior to 1/7/2003?

Ans. It is a cardin.al principle of taxation that no tax can be levied or collected except by authority of law. Thus, if the levy of Service tax on a particular service comes into force on a given date, that service will not be taxable if rendered before that date. The levy of Service Tax on "Maintenance or Repair Service" has come into force on 1/7/2003. Accordingly, any maintenance or repair service rendered prior to 1/7/2003 will not be taxable, irrespective of when the bills are raised or payment made. This will apply to other services as well which were rendered prior to the imposition of Service Tax on them.

- [DPPR C & CE, October, 2003]

Main text of Department Circular/Trade Notice

[Para 2.3 of Cir.No. 59/8/2003, dt. 20/6/2003]

2.3 Maintenance and Repair Services:

2.3.1 Maintenance contracts entered into before 1st July 2003:

There are cases where maintenance contracts are entered into for a period of more than one year. Vide notification No.I1/2003-Service Tax, dated 20th June 2003 for maintenance contracts entered into prior to 1st July, 2003, exemption has been provided to that part of the value of the service for which bill/invoices have been raised and the amount has actually been received prior to the 1st July, 2003. For such contracts, all subsequent payments or payments made against invoice issued subsequent to the 1st July 2003' will be chargeable to service tax. Similar will be situation for payments made for continuing services.

2.3.2 Certain doubts have been raised in case of maintenance and repair services as to whether service tax on maintenance and repair would be charged in cases' where during the guarantee period, the services are provided to the buyer of the goods while the payments for the same are received from the supplier of the goods. In this regard it is clarified that irrespective of. the fact that the receiver of the service is different from the person making payments for such services, the service tax is leviable on the services provided towards maintenance and repair. Therefore, for the services provided during the warranty period by the dealer or any other authorized person, service tax would also be leviable on any amount received by such dealer or such other authorized person from manufacturer of such goods.

[Para No.3 of Cir. No. 62/11/2003-ST, dt. 21/8/2003]

Cir. No. 62/11/2003-STDate: 21/8/2003

3. Maintenance or repair service:

3.1 Maintenance or repair services rendered under contracts entered into prior to 1/7/2003 are exempted from service tax if the bills are raised, and

payment also made, prior to 1/7/2003 (Notification No.11/2003-ST dated 20/6/2003). In this context a doubt has been raised as to whether service tax would still be chargeable in cases where though the bills are raised, or payment made, after 1/7/2003, but the service was rendered prior to 1/7/2003.

3.2 It is a basic principle that no tax can be charged except under authority of law. Thus, if the levy of service tax on a particular service comes into force on a given date, that service will not be taxable if rendered before that date. The levy of service tax on "Maintenance or repair service" has come into force on 1/7/2003. Accordingly any maintenance or repair service rendered prior to 1/7/­2003 will not be taxable, irrespective of when the bills are raised or payment made. This will apply to other services as well which were rendered prior to the Imposition of service tax on them.

3.3 Notification No. 20/2003-Service Tax dated 21/8/03 has been issued which exempts services in relation to maintenance or repair of computers, computer systems and computer peripherals.

[Para No.3 of Clr. No. 65/14/2003-ST, dt. 5/11/2003]

Clr. No. 65/14/2003-ST, Date: 5/11/2003

3. In this context, attention is invited ,to para 2.3.1 of circular No.59/8/ 2003 dated 20/6/ 2003 wherein it was clarified that in view of the notification 11/2003-ST dated 20/6/2003, no service tax would be payable where maintenance contracts are entered into before 1/7/2003, provided the invoices are raised and paid prior to 1/7/2003. It was further mentioned in the circular that similar would be the situation in case of continuing services. By continuing services what was meant was continuing maintenance services where there is an ongoing contract under which regular periodical payments are made. That para 2.3.1 was only in the context of maintenance and repair service is also quite clear from' the heading, "MAINTENANCE AND REPAIR SERVICES" of para 2.3 in that circular. No similar exemption has been granted to any other service in case of advance payments.

Exemption 1 - Clause 151(c) of Finance Bill, 2003 seeks to amend Section 67 of the said Act so as to clarify that the cost of parts or other materials, if any, sold to the customer during the course of providing maintenance of repair service or the cost of parts or other materials, if any, sold to the customer during the course of providing commissioning or installation services shall not be included while computing the service tax payable.

Exemption 2 - (Para 2.9.1 of Cir.No. 59/8/2003-ST, dt. 20/6/2003): In case of authorized service stations, maintenance or repair services, commissioning and instalhition services and photography services it has been provided in the law that the cost of goods and material shall not form part of the value to be subject to service tax, if evidence (like sale invoice/bill) shows that these goods were sold. Such dispensation has, however, not been provided for other services like commercial coaching and training centres, telecom services. In this regard, a general exemption under Notification No. 12/2003 –Service Tax dated 20^thjune, 2003 has been issued exempting that part of the value of all taxable services from service tax, which represents the cost of goods or material sold by the service provider for the receiver of such services during the course of provision of the taxable services. This exemption would be available only in cases where the sale of such goods is evidenced and the sale value is quantified and shown seperately in the invoice. It is also clarified that in case of commercial training and coaching institutes, the exclusion shall apply only to the sale value of standard textbooks, which are priced. Any study materials or written text provided by such institute as apart of service which does not satisfy the above criteria will be subjected to service tax.

ATM Repairs

Cir.No. 74/4/2004-ST, Date: 23/1/2004

Sub: Clarification for the maintenance and repair services for Automated Teller Machines (ATMs) – Liability of service tax – Regarding

The Board has received representations seeking clarification with regard to leviability of Service Tax in respect of maintenance & repair of ATMs in terms of Notification no. 20/2003-ST dated 21/8/2003.

2. The matter has been examined in the Board . It is clarified that computers are essentially data processing machines and their function is to process analog or digital data. There may be machines, which use such processed data to perform certain specified functions. These machines may involve processing of data but their principal functions is not processing of data per se but using such processed data for performing independent functions. These are not ‘computers’ but are computerised machines. ATM is one such machine. For the purposes of Customs Tariff also, whereas computer falls under heading 84.73, ATMs fall under sub-heading 8472.90.

3. In view of the above stated facts, the Board has taken a decision that Automatic Teller Machine is not a ‘Computer System’ or ‘Computer Peripherals’ (all of which perform or aid primarily in data processing per se) and thus their maintenance and repair does not fall under exemption Notification No. 20/2003-ST, dt.21/8/2003. Accordingly such services are liable for service tax.