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 services^l[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,20^thJune, 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.

Services rendered in respect of merger and acquisition ­Whether covered under the scope of taxable services provided by "Management Consultant"

Indian Service Tax

Clarifications

Merger and Acquisition

Cir. No. 1/1/2001-ST (Section 37-B), Date: 27/06/2001

Sub:- Services rendered in respect of merger and acquisition ­Whether covered under the scope of taxable services provided by "Management Consultant"

Section 65(65), w.e.f. 10/9/2004.

• I am directed to say that a doubt has been raised as to whether services rendered in respect of merger and acquisition will be covered under the scope of taxable services provided by a “management consultant”.

• In response to a public notice issued on 15^thFebruary 2001, by the Central Board of Excise and Customs, the trade and tother agencies have represented that services provided in respect of merger and acquisition is in the nature of financial advisory services and is not a management consultancy service. It is stated that services provided by them involves, inter alia, analysis of business opportunities for merger or acquisition, valuation of target companies, transaction structuring negotiating documentation and compliance with the regulations for effecting a buy or sale transaction. Acquisition or delivering of share holdings is purely a financial transaction and are distinct from the advice or service provided for deciding to divest/merge or acquire an organisation. Hence they claim that the services provided by them would not be covered under the taxable services provided by ‘management consultant’.

• The matter has been carefully examined by the Board. The term ‘management consultant’ has been defined in section 65(37) of the Finance Act, 1994 to mean “any person who is engaged in providing any service, either directly or indirectly, in connection with the management of any organisation in any manner and includes any person who renders any advice, consultancy or technical assistance, relating to conceptualising, devising, development, modification, rectification or upgradition of any working system of any organisation”. Further the taxable service in respect of management consultant has also been defined under clause ® to section 65(72) as any service provided in connection with the management of any organisation, in any manner.

• ‘Management’ has been generally understood to mean the process of application of management principles, methods and practice for the efficient functioning of different systems of an organisation such as production, personnel, marketing or finance. It is seen that as a part of modern business management practice, company from the business organisations pursue merger and acquisition to strength their competitive position in one or more business area such as product groups or markets. Merger and acquisition is also resorted to enhance operating effciencies and to capture synergies in one or more functional area such as marketing, manufacturing, R&D or finance. Similarly, companies undertake divestiture transaction to withdraw from business area with weak competitive positions or to reduce the losses/costs. From the above, it appears that merger, acquisition or other forms of restructuring have emerged as key element in management of modern business organisation.

• The merger and advisory services rendered by any adviser or consultant may include one or more of the following specific components or activities. These may either be on the buy-side transaction assisting companies to acquire or on the sell-side assisting companies to divest, resulting into merger, acquisition or other forms of organisational restructuring:

  • Stragies review and establishing strategic rationale for merger or acquisition.

  • Performing financial and business analysis.

  • Target screening, identification and evaluation.

  • Financial analysis and valuation of target company or merging companies.

  • Carrying out financial and legal due diligence.

  • Detailed analysis of regulaory and tax implications and evaluation of alternative structures.

  • Deal structuring such a smerger, friendly acquisition, hostile bid, asset buy-out, demerger, slump sale etc.

  • Advising as to the means and source of financing transactions and arranging finance, if required.

  • Complying with regulatory requirements such as managing public offer under SEBI’s TAKEOVER Regulations.

  • Counselling on bidding strategy and tactics.

  • Establishing negotiating positions and assist in negotiating with the target company management.

  • Coordinating with legal counsel in finalising the terms of the purchase/acquisition agreement and

  • Assisting in post-acquisition integration.

  Out of the above services, so far as (a) and (m) are concerned these services are mainly offered by strategy/general anagement consultants or other consultants specilising in Human resource management. In so far as (b) to (i), these services are offered, either jointly or severally, by variety of firms.

• The services provided in connection with merger and acquisition is in the nature of providing and advice, assistance in the financial management of an organisation resulting into merger, acquisition or other form of financial or organisational restructuring of a company. The nature of services provided by an adviser/consultant vary depending upon the contractual obligation and the legal complaince under various regulations governing such transactions. However, these factors in no way change the nature of service provided by such service provider. Acordingly, they appear to be providing service in relation to management of an organisation.

• In this regard, the Board had consulted the Indian Institute of Management, Ahmedabad for obtaining an expert opinion on the subject matter. They have opined that the term. “Management” is generally understood to mean running the affair of an organisation in an organised and systematic manner. To be able to do this efficiently and effectively, management typically involves carrying out a host of activities, functions and tasks and at different levels, Thus management encompasses both strategic and operational level functioning and would include tasks such as planning, organising, staffing, directing, controlling and coordinating. Management also invariably involves designing organisational structure around functions such as marketing, manufacturing, research and development and finance and/or business area such as product groups or geographical markets. Thus management of any organisation involves carrying out a wide variety of clearly defined activities across a number of organisational sub-units in a coherent and coordinated manner. Since the expression "Management" is .an inclusive term, 'management consultant' would also be equally encompassing expression and would include any adviser who renders services on any aspect of management. They have further opined that financial advisory services rendered in merger and acquisition transactions are clearly in the nature of services in connection with the management of an organisation as merger and acquisition themselves are important dimension of modern management.

• After considering the ILO publication on "management consulting", various other literature on the subject, management practices and profiles of practicing management consultants they have concluded the following: (i) the term 'management' is a broad term to cover the various functions and the multifarious activities required for its efficient and effective functioning; (ii) management consulting is not restricted, but is wide enough to include advisory services rendered on any aspect of management; (iii) merger and acquisition are an important aspect of management of any organisation today; and (iv) advisory services, including financial advisory services, for merger and acquisition clearly fall within the realm of management consulting. It is also stated by them that even though merger and acquisition is provided by a variety of agencies, known as investment banks/merchant banks, corporate finance/advisory services of commercial banks/financial institutions, corporate finance/advisory services division of accounting/audit firms, specialized mergers and acquisition boutiques, strategy/general management consultants having differing organisational or ownership profile, such semantic differences in any way do not obliterate the basic nature of the services that clearly relate to management of an organisation. Accordingly they had concluded that the financial advisors for merger and acquisition would come under the category of 'management consultant' for the reasons that the services provided by them are clearly in connection with the management of any organisation.

• Taking into account all the above points, the Board has taken ,a view that merger, acquisition and other form of restructuring of business organisation have emerged as key element in the modern management and as the term 'management' covers the various functions and the multifarious activities required for efficient and effective functioning of an organisation, any advisory services rendered in merger and acquisition transaction are also includible under the taxable service rendered by 'management consultant'. However, those agencies providing services as per the requirement of any statute or regulation such as Takeover Regulations of SEBI and, if their role is limited to the compliance of such act or regulations and not governed by any contractual relationship with the advisee company, then such services will not be covered under the scope of 'management consultant'.

• Now, therefore in exercise of the powers conferred under Section 37B of the Central Excise Act, 1944, (as made applicable to service tax by Section 83 of the Finance Act, 1994) the Board hereby clarifies that any services rendered in relation to merger and acquisition will be covered under the scope of taxable services provided by "management consultant" and these services will be liable to service tax accordingly.

  It is further clarified that certain agencies such as merchant banks who are required to play only a statutory role under any act or regulation such as Takeover Regulations of SEBI, and do not provide any advice or consultancy but merely verify and submit a report to the concerned authorities, in connection with merger and acquisition transaction are not treated as 'management consultant'. However, with the changes brought in by the Finance Act, 2001, the services provided by such agencies would also be covered specifically under the 'banking and other financial services' [Section 65(10)(vi)] on which the service tax levy will come into force from a date to be notified by the Government.

• The Board further directs that copy of this order be sent to all Chief Commissioners and Commissioners of Central Excise for being observed and for being made available as required to all other persons employed in the execution of the Act and for issue of trade notice.

"management consultant"means any person who is engaged in providing any service, either directly or indirectly

Indian Service Tax

Management Consultant

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: "management consultant"means any person who is engaged in providing any service, either directly or indirectly, in connection with the management of any organisation in any manner and includes any person who renders any advice, consultancy or technical assistance, relating to conceptualising, devising, development, modification, rectification or up gradation of any working system of any organisation; [Section 65(65)]

Taxable service: Management consultant providing service to a client in connection with the management of any organisation in any manner.

Value of taxable service: The gross amount charged by such consultant from the client for services rendered in connection with the management of any organisa~ion in any manner.

Person liable to pay: Management Consultant.

Head of Account

SI. Code SCCD Minor-head 004400130 Management Consultant Services 004400115 Sub-head 00440013001 Tax Collection 004400116 110 Sub-head 00440013002 Other Receipts 00440117 111 Sub-head 00440013003 Deduct Refunds 00440118 118

Questions & Answers

Q. 1l Who is Management Consultant?

Ans. "Management Consultant" is a person who is engaged in providing any service, either directly or indirectly, in connection with the management of any organization in any manner and includes any person who renders any advice, consultancy or technical assistance, relating to conceptualizing, devising, development, modification, rectification or up gradation of any working system of any organization.

Q. 2 What is the taxable service in case of a Management Consultant?

Ans. Taxable service means any service provided to a client, by a management consultant in connection with the management of any organization in any manner.

Q. 3 What is the value of the taxable service in case of Management Consultant?

Ans. Value of the taxable service in relation to the service provided by a management consultant to a client, is the gross amount charged by such consultant from the client for services rendered in connection with the management of any organization in any manner.

Q. 4 The Management Consultants render lectures/briefs/advice to the management association members for promoting sound management principles and practices. Whether such services are liable for service tax?

Ans. Yes. The activities of rendering lectures / briefs / advice to the management association members relate to up gradation of human resources of an organization. Therefore, these services would correctly attract service tax as Management Consultant.

Changes from 10/9/2004

F.No.B2/812004-TRU, Date: 10/9/2004

23. Service tax on IT industry:

Taxable services provided in respect of Enterprise Resource Planning (ERP) software systems by a management consultant for management of any organization has been exempted. (Refer Notification No.16/2004-S.T.,dated 10/9/2004).

Main text of Departmental Circular/TN

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

7.1 As per Section 65(21)* of the Finance Act, 1994, "management consultant" means any person who is engaged in providing any service, either directly or indirectly, in connection with the management of any organisation in any manner and includes any person who renders any advice, consultancy or technical assistance, relating to conceptualising, devising, development, modification, rectification or up gradation of any working system of any organisation. The "taxable service" means the service provided to a client by a management consultant in connection with the management of any organisation in any manner.

the value of the said portion of taxable services is received from the customer prior to the 1st day of July, 2003

Indian Service Tax

Notifications

Contracts entered before 1/7/2003

[Notofication No. 11/2003-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 that portion of the taxable services provided to a customer by any person in relation to maintenance or repair, under a maintenance contract or agreement in relation to maintenance or repair of any goods or equipment excluding motor vehicle, which was entered into prior to the 1^stday of July, 2003, from the service tax leviable thereon under sub-section (2) of section 66 of the said Act, if -

• the bill or invoice for the said portion of taxable services is raised prior to the 1^st day of July, 2003; and

• the value of the said portion of taxable services is received from the customer prior to the 1^st day of July, 2003

2. This notification shall come into force on the 1^stday of July, 2003.

Exemption

[Notification No.20/2003-ST, dt. 21/8/2003]

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 taxables service provided to a customer by any person in relation to maintenance or repair of computers, computer systems or computer peripherals, from the service tax leviable thereon under Section 66 of the said Act.

Note: The above Noti. 20/2003-ST rescinded by Noti. 7/2004-ST, dt. 9/7/2004.

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.

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

[Notification No. 9/2002-ST, dt. 01/08/2002]

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 an insurer carrying on life insurance business, to a policy holder in relation to life insurance business from the whole of the service tax leviable thereon under

2. This notification shall come into force on the 16th day of August, 2002.

Note:- The above Noti. No. 9/2002-ST, dt. 1/8/2002 is rescinded by Noti. No. 23/2004-ST, dt. 10/9/2004.

[Notification No. 23/2004-ST, dated 10/09/2004]

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 rescinds the notifications of the Government of/India in the Ministry of Finance (Department of Revenue), No. 4/99-Service Tax, dated the 28th February, 1999 [G.S.R. 187 (E), dated the 28th February, 1999] and No. 9/2002-Service Tax, dated the 1"1 August, 2002 [G.S.R. 537 (E), dated the 1st August, 2002], except as respects things done or omitted to be done before such rescission.

Prior to 10/9/2004

[Notification No. 25/2004-ST, dated 10/9/2004]

For full text see under "Banking & Other Financial Services".

"Life Insurance Business" has the meaning assigned to it in clause (11) of Section 2 of the Insurance Act, 1938

Indian Service Tax

Life Insurance Service

Effective Date: 16/08/2002.

Authority: Notification No. 8/2002-ST, dt. 1/8/2002 (for full text of Notification see under'Beauty Parlour').

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%.

Definitions:

"Life Insurance Business" has the meaning assigned to it in clause (11) of Section 2 of the Insurance Act, 1938 (4 of 1938), [Section 65 (61)]"policy holder"has the meaning assigned to it in clause (2) of Section 2 of the Insurance Act, 1938 (4 of 1938), [Section 65 (80)]

Taxable service: Life insurance services provided to a policy holder by an insurer carrying on life insurance business or by an actuary or intermediary or insurance intermediary or insurance agent in relation to insurance auxiliary services concerning life insurance business.

Person liable to pay: Insurer.

Value of taxable service: Gross amount received for the services provided.

Head of Account

SI. Code SCCD Minor-head 004400146 Life Insurance Service including Insurance Auxiliary Services Relating to Life Insurance. 00440184 Sub-head 00440014601 Tax Collection 00440185 110 Sub-head 00440014602 Other Receipts 00440186 119 Sub-head 00440014603 Deduct Refunds 00440187 112

Changes from 10/9/2004

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

2.1 Life Insurance Services.

21.1 In Budget 2004, it has been decided to levy service tax on that portion of the service which pertains to risk element. The levy would not be applicable to such premium of the existing policies, which were paid before the new levy comes into force.

21.2 It has been provided that in the case of composite policies (risk plus savings) life insurer can at his option pay 1% of the total premium towards discharge of service tax liability. This shall not be applicable in case an insurance policy is towards risk only or where the premium gives details of risk premium and other premium seperately. (Refer Notification No. 11/2004-ST., dated

10/9/2004). However, those insurance companies who want to pay tax on risk premium as certified by the Appointed Actuary on a company basis can do so. The insurance companies may be allowed to pay monthly service tax provisionally, based on estimates. The monthly estimated (i.e. provisional) duty payment for the entire company would be based on a provisional certificate issued by the Appointed Actuary, subject to final certification at the end of the year. At the end of the financial year, when the sum at risk is calculated and certified by the Actuary, the liabilities would be finalized and the companies would pay the balance tax or adjust the excess tax paid.

Main text of Departmental Circular/TN

For full text of F.No. B.11/1/2002- TRU, dt. 1/8/2002 see under "Insurance Auxiliary Service".

leased circuit "means a dedicated link provided between two fixed locations for exclusive use of the subscriber

Indian Service Tax

Leased Circuit Service

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: leased circuit "means a dedicated link provided between two fixed locations for exclusive use of the subscriber and includes a speech circuit, a data circuit or a telegraph circuit, [Section 65(60)]

Taxable service: Leased circuit service provided by the telegraphic authority to a subscriber.

Value of taxable service: Gross amount chtaarged from the subscriber, but the initial deposit made by the subscribers at the time of application shall not be included in the value of taxable service. However, any adjustment made by the Telegraph Authority from any deposit made by the subscribers at the time of application for such services shall be included.

Person liable to pay: Telegraph Authority.

Head of Account

S1. Code SCCD Minor-head 004400134 Leased Circuits Service 00440136 Sub-head 00440013401 Tax Collection 00440137 119 Sub-head 00440013402 Other Receipts 00440138 110 Sub-head 00440013403 Deduct Refunds 00440139 111

Main text of Departmental Circular/TN

[Ministry's F.No. B.II/I/2000-TRU dated 9/7/2001 - Annexure XII]

N.B.:- For full text of Ministry's F.No. B.II/I/2000-TRU dated 9/7/2001 see Annexure XII under "Facsimile Service".

"internet cafe"means a commercial establishment providing facility for accessing internet."

Indian Service Tax

Internet Access Service

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(57)"internet cafe"means a commercial establishment providing facility for accessing internet."

Taxable Service: Services rendered by an internet cafe to any person relating to access of internet.

Value of Taxable Service: Gross amount charged by an Internet Cafe for providing access of internet.

Person liable to pay: Internet cafe/cyber cafe.

Head of Account: Tax Collection - 00440241, Other Receipts - 00440242, Deduct Refunds - 00440243.

"Interior Decorator" means any person engaged, whether directly or indirectly, in the business of providing by way of adviceta

Indian Service Tax

Interior Decorators

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

"Interior Decorator" means any person engaged, whether directly or indirectly, in the business of providing by way of advice, consultancy, technical assistance or in any other manner, services related to planning, design or beautification of spaces, whether man-made or otherwise and includes a landscape designer, [Section 65 (59)]

Taxable service: Interior Decorator providing service to a client in relation to planning, design or beautification of spaces, whether man-made or otherwise in any manner.

Value of taxable service: Gross amount charged from the client by such interior decorator from the client for services rendered in professional capacity in any manner.

Exemptions

• Sub-contracting

• Supply of materials, items of furniture or decoration

• Art directors of films, temporary structures/settings for shooting

• Artists, Carpenters & Painters

Person liable to pay: Interior decarator or Landscape designer.

Head of Account

S1. code SCCD Minor-head 004400120 Interior Decoration!/Designers Services 00440075 Sub-head 00440012001 Tax Collection 00440076 115 Sub-head 00440012002 Other Receipts 00440077 116 Sub-head 00440012003 Deduct Refunds 00440078 113

Questions & Answers

Q.5 Who is an ' Interior Decorator'?

Ans. "Interior decorator" is a person engaged, whether directly or indirectly, in the business of providing by way of advice, consultancy, technical assistance or in any other manner, services related to planning, design or beautification of spaces, whether man-made or otherwise and includes a landscape designer.

Q. 6 What is the taxable service in case of Interior decorator?

Ans. Taxable service is a service provided to a client, by an interior decorator in relation to planning, design or beautification of spaces, whether man­ made or otherwise, in any manner.

Q.7 What is the value of the taxable service in case of an Interior Decorator?

Ans. Value of the taxable service in relation to the service provided by an interior decorator to a client, is the gross amount charged by such decorator from the client for services rendered in relation to planning, design or beautification of spaces in any manner.

Q. 8 How would the Service tax liability be determined in cases of ongoing projects, i.e., the projects which started before 16^th October, 1998 and still continuing after 16^thOctober, 1998.

Ans. In such cases, the service tax is payable only in respect of the part of the services rendered on or after the date on which the service tax provisions come into force i.e 16^thOctober, 1998. Service tax is not required to be paid on payment received for services rendered prior to the service concerned being notified.

Q.9 Is service tax also liable to be paid by an Architect or an interior decorator to whom the work has been delegated by another Architect or Interior Decorator?

Ans. No, in cases where an architect/interior decorator sub-contracts part/whole of his work to another architect/interior decorator, no service tax is required to be paid by the sub-contractor provided that the principal architect/ interior decorator has paid the service tax on the services rendered by him to the client and provided the sub-contracting is in respect of the same service category.

For instance when the work is sub contracted by one architect to another architect, if the principal architect pays the service tax on services rendered by him to his client, the sub-contracting architect is not .required to pay the service tax. However, service tax would be required to be paid in a case where sub contracting is to different service category. For example where an architect sub contracts his work to a consulting engineer, then service tax would be required to be paid separately by both the architect and the consulting engineer on the services rendered by them.

Q. 10 Is the payment made by an Architect or Interior Decorator for supply of material, items of furniture or decoration includible in the value of the taxable service?

Ans No. The service tax is not leviable on supply of materials, items of furniture or decoration, per se, but only on services rendered in any manner concerning planning, design or beautification of spaces.

Q. 11 Are the Services rendered by the Art director of films and others for setting up temporary structure or sets for shooting .covered in the category of service provided by an Architect or Interior Decorator?

Ans. No. The services rendered by Art directors of films and others who render services of design etc. for setting up temporary structures/settings for shootings, etc. do not attract the service tax levy as such interior decoration is only of a temporary nature.

Q. 12 Whether Vaastu/Feng Shui Consultants come under the category of Interior Decorators?

Ans. Interior Decorator means any person engaged whether directly or indirectly, in the business providing by way of advice, consultancy, technical assistance or in any other manner services related to planning, design or be antification of spaces, whether man made or other wise. Since Vaastu/ Feng Shui Consultants are offering services by way of advice relating to planning and designing of spaces, they come under the category of Interior Decorators.

[Source CBEC Website]

Main text of Departmental Circular/TN

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

4.4 As per Section 65(20) "interior decorator" means any person engaged, whether directly or indirectly, in the business of providing by way of advice, consultancy, technical assistance or in any other manner, services related to planning, design or beautification of spaces, whether man-made or otherwise and includes a landscape designer. The "taxable service" in the case of an interior decorator means any service provided to a client in relation to planning, design or beautification of spaces, whether man-made or otherwise, in any manner.

4.5 An issue has been raised as regards the basis on which determination of the service tax liability on ongoing projects (on the date of service tax coming into effect) is to be made. In this regard it is clarified that service tax is payable only in respect of services rendered on or after the date on which the service tax provisions come into force. Service tax is not required to be paid on payments received for services rendered prior to the service tax concerned being notified.

4.6 Further, in cases where an architect/interior decorator sub-contracts part/whole of his work to another architect/interior decorator, it is clarified that no service tax is required to be paid by the sub-contractor provided that the principal architect/interior decorator has paid the service tax on the services rendered by him to the client and provided the sub-contracting is in respect of the same service category. In other words, work is sub-contracted by one architect to another architect. In such cases, if the principal architect pays the service tax on services rendered by him to his client, the sub-contracting architect is not required to pay the service tax. However, service tax would be required to be paid in a case where sub-contracting is to a different service category. For example where an architect sub-contracts his work to a consulting engineer, then service tax would be required to be paid by both the architect and the consulting engineer on the services rendered by them. Similarly, a market research agency would be required to pay service tax on services rendered by it to an advertising agency, even if the advertising agency is also liable to pay service tax on the amount billed to its client for advertising services (which,inter alia,includes the amount paid by the advertising agency for such market research services to the market research agency).

4.7 It is also clarified that service tax is not leviable on supply of materials, items of furniture or decoration, per se, but on services, rendered in any manner, concerning planning, design or beautification of spaces. Also the services rendered by Art directors of films and others who render services of design etc. for setting up temporary structures/settings for shootings etc. do not attract the service tax levy as such interior decoration has no permanency and is only of a temporary nature.