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Service tax clarification

PrasadN (Lerner) (105 Points)

20 July 2012

What is declared services ?,Because Govt already introducued negative list of services which is not taxable, So other than negative list every thing is covered under taxable services, Is there any specific reason introduced for this declared services.

and

is cover below activities under service tax liability(either SP or SR,both)

Water charges(Local muncipalities,Panchayats provided to industries), self power generation duties, Property tax, etc., Because Power distribution under covered under negative list, no details about other govt activities

Please correct me if my understanding is wrong.

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4 Replies

Roshan Thomas (C.E.O ) (356 Points)
Replied 20 July 2012

Declared services have been specifically listed so as to remove any ambiguities in the Service Tax Law. The new ST Law has defined Service and it may lead to doubts regarding taxability of certain services already taxed under old law.

Following are declared services ( it is to be noted that all except Sl No. 5 is taxed under old law)

1. renting of immovable property;

2. construction of a complex, building, civil structure or a part thereof, including a

complex or building intended for sale to a buyer, wholly or partly, except where the

entire consideration is received after issuance of certificate of completion by a

competent authority;

3. temporary transfer or permitting the use or enjoyment of any intellectual property

right;

4. development, design, programming, customization, adaptation, up gradation,

enhancement, implementation of information technology software;

5. agreeing to the obligation to refrain from an act, or to tolerate an act or a situation,

or to do an act;

6. transfer of goods by way of hiring, leasing, licensing or any such manner without

transfer of right to use such goods;

7. activities in relation to delivery of goods on hire purchase or any system of payment

by instalments;

8. service portion in execution of a works contract;

9. service portion in an activity wherein goods, being food or any other article of human

consumption or any drink (whether or not intoxicating) is supplied in any manner as

part of the activity.

Regarding the second part of your question -

Water charges(Local muncipalities,Panchayats provided to industries) - Exempted under negative list

self power generation duties - I do not know

Property tax - Exempted under negative list

Prateek Agarwal (Sr. Executive - Finance & Accounts) (1732 Points)
Replied 20 July 2012

Thanks Roshan for a crystal clear reply.

prashanta (accountant) (46 Points)
Replied 20 July 2012

thanks sir , for guidance

RENGARAJ R.K (ADVOCATE) (7557 Points)
Replied 20 July 2012

Mr Prasade,

For your first part of the query, the answer is this:

After the 46th amendment in the Indian Constitution, taxing definiton was expanded to the folowing categories where the State Government can levy the taxes on such transactions. The amendment states, "It is, therefore, proposed to suitably amend the Constitution to include in article 366 a definition of "tax on the sale or purchase of goods" by inserting a new clause (29A). The definition would specifically include within the scope of that expression tax on---

(i) transfer for consideration of controlled commodities;

(ii) the transfer of property in goods involved in the execution of a works contract;

(iii) delivery of goods on hire-purchase or any system of payment by instalments;

(iv) transfer of the right to use any goods for any purpose for cash, deferred payment or other valuable consideration;

(v) the supply of goods by an unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration;

vi) the supply, by way of or as part of any service, of food or any drink for cash, deferred payment or other valuable consideration.

Therefore in order to tax on the service portion in such categories, the Central Government has decided to call it as specified services. For e.g works contract. Morever, in renting of immovable properties the Hon'ble High courts of mumbai and delhi questioned the charging section of the Service Tax stating what service is involved in renting? So, such services are included and declared in the specified services to remove ambiguity and disputes.