BUSINESS SUPPORT SERV ICE
- CA SUDHIR HALAKHANDI
(The above article was written when service tax was introduced on Business support service)
Business support services have been introduced under the net of service tax by the finance Act-2006 and this is applicable from 1st. May 2006 and it is a very interest and wide enough service, which is newly introduced under the net of service tax. Let us try to understand this particular service: -
1.WHAT IS BUSINESS SUPPORT SERVICE
Support service of business or commerce: -Section 65(104c) “support services of business or commerce” means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing.
Explanation. —For the purposes of this clause, the expression “infrastructural support services” includes providing office along with office utilities, lounge, and reception with competent personnel to handle messages, secretarial services, Internet and telecom facilities, pantry and security.
ILLUSTRATIVE LIST OF BUSINESS SUPPORT SERVICES
Let us first analyse the definition of the Business support service of business and commerce and it means any service provided or to be provided in Relation to business and commerce and it is very wide definition and to illustrate the scope of this service following type of services connected with the business and commerce have been given:-
1. Evaluation of the Prospective Customers
3. Process of purchase orders and their fulfillment services
4. Customer relationship Management service
5. Accounting and processing of transactions
6. Information and tracking of deliveries Schedule
7. Managing distribution and logistics
8. Operational assistance for marketing
9. Formulation of customer service and pricing policies
10. Infrastructural support services and other transaction processing
Here one should note that all the Business and commerce support services are taxable without any exception and the list given above which has been compiled from the Definition of the Business and Commerce support service as given in section 65(105) (104C) is only illustrative.
EXPLANATION TO INFRASTRUCTURE SUPPORT SERVICE
One explanation is added to this particular section to explain the scope of Infrastructure support service and it in this explanation it is provided that the Infrastructure support service will include the following also: -
Providing office along with: -
1. Office utilities
4. Competent personnel to handle message
5. Secretarial services
6. Internet and telecom facilities
MERE RENTING THE OFFICE IS NOT TAXABLE
Here one should note merely renting an office place is not “Business and Commerce Support service” the taxable service is only arises when the service provider provides abovementioned office facilities.
2.WHAT IS TAXABLE SERVICE
Taxable service: - Section 65(105) (zzzq) Taxable service means any service provided or to be provided to any person, by any other person, in relation to support services of business or commerce, in any manner.
Here taxable service means: -
- Any service provided or to be provided;
- To any person;
- By any other person;
- In relation to support service of Business or Commerce;
- In any manner.
At present in case of Business auxiliary service the service is taxable only when it is provided by the “Commercial concern” and now the word “Commercial concern” is also proposed to be replaced by “Any person” to widen the scope of the service. In case of newly any person provides introduced service “Business and Commerce support” service at the initial state it is provided that the service will be taxable in case of it is provided by “any other person”. Hence the scope of the Business auxiliary services has been widened and the Business support service is being introduced with already widened scope from the initial stage.
3.PERSON LIABLE TO PAY SERVICE TAX
Normally the service tax is payable by the service provider but in certain exceptions this tax is payable by persons other than service provider i.e. service receiver etc.
The fifteen services introduced this year there is only one exception of this rule that the service tax is to be paid by the service provider and this exception is “Sponsorship” services.
Hence like all other services, in this service also the responsibility of payment of tax is of the service provider.
BUSINESS SUPPORT SERVICES:Business entities outsource a number of services for use in business or commerce. These services include transaction processing, routine administration or accountancy, customer relationship management and tele marketing. There are also business entities, which provide infrastructural support such as providing instant offices along with secretarial assistance known as “Business Centre Services”. It is proposed to tax all such outsourced services. If these services are provided on behalf of a person, they are already taxed under Business Auxiliary Service. Definition of support services of business or commerce gives indicative list of outsourced services.
– As written by Joint secretary, TRU, Ministry of Finance, Department of Revenue, in D.O.F. No. 334/4/2006- TRU, Dated 28-02-2006 to all commissioners, chief commissioner and DG.
5. EXEMPTION TO SMALL SERVICE TAX PROVIDER
The exemption scheme for small service provider as provided by Notification No. 6/2005 dated 1.3.2005 is also applicable for this service also and if the Gross value of services provided in the immediately preceding year does not exceed Rs.4 Lakh then the service provider will be eligible for an exemption from service tax on first Rs. 4 Lakh collection in the current year.
If the service provider who otherwise eligible according to this Notification can claim benefit of this scheme. The one very important restriction in this respect is that the service provider should not use brand name or trade name, whether registered or not, of any other person while providing the services. If he is using the same then the benefit of this scheme will not be available to him.
There may be certain Business support service provider using the brand or trade name of other persons or clubs then no benefit is available to such service providers as per the provisions this exemption scheme for small service providers.
Some more restriction such as non- availability of cenvat credit to such service providers is also another feature of this scheme, which should be kept in mind while taking benefit of this scheme.
6.OTHER GENERAL EXEMPTIOS
There are certain other general exemptions, which are available to all the service providers. Here we are giving the list of such exemption and if any one of them is applicable to Recovery Agents can be claimed: -
1.Services rendered to the United states or an international organisation – Notification No.16/2002 ST, dated 2.8.2002
2.Services rendered to SEZ developer or an unit located in SEZ for development, operations and maintenance or setting up SEZ units- Notification No. 17/2002-ST, dated 21.11.2002 and Notification No. 4/2002-ST, dated 31.4.2004
7.DATE OF TAXABILITY
The Finance Act-2006 has introduced the service and the date of applicability of service tax for all the 15 new services introduced by the Finance Act-2006 is 1st. May 2006 hence this service is also taxable w.e.f. . 1st. May 2006.
These are the general requirements as applicable to all the services but for the benefit of service providers under this head these are summarized as under: -
(i). DEPOSIT OF TAX: -
In case of proprietorship and partnership firm tax has to be deposited quarterly and the date of deposit of service tax are as under: -
QTR ENDING ON
Since the service tax on service imposed on 1st. May 2006 hence the tax for first two months i.e. May and June 2006 has to be deposited on 5th July 2006 and thereafter by 5th Day of the Month following the quarter to which tax relates as mentioned above.
In case of other Assesses: -
5th Day of the immediately following the month to which tax is related but the tax of the Month ended with 31st. March has to be deposited on 31st. March itself.
For example the Tax of the Month of April has to be deposited by 5th May, tax of May has to be deposited by 5th June etc. The tax for the last month of the year i.e. March has to be deposited on 31st. March itself.
(ii) RATE OF INTEREST: -
(iii). FILLING OF RETURNS: -
Returns are required to filed half yearly and the dates of filling are as under: -
- Half year ended with 30th Sept: - 25th Oct.
- Half year ended with 31st. March: - 25th April
Since the service is taxable w.e.f. 1st. May 2006 only hence the first return of the year will cover only 5 Months and will have to be filed on or before 25th Oct.2006.
(iv). RATE OF SERVICE TAX: -
12% Plus 2% Education cess hence total 12.24%
9. RELEVANT CODES: -
* “Other receipts” is meant for Interest and penalty leviable on delayed payments