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As per Section 68 of the Finance Act, 1994, the person providing the taxable service is required to pay the service tax. However, as per Section 68(2), the government can notify services for which any person other than the service provider shall be liable for compliance of various provisions under the act.

Under this, by Notification No.36/2004-ST dated 31.12.2004 as amended; the government has notified certain services and the person liable for paying the taxes. Rule 2(1) (d) of the Service Tax Rules, 1994 defines the person liable for paying service tax which is as follows:

1] Telecommunication Service

Any service provided or to be provided; to any person, by the telegraph authority in relation to telecommunication service is taxable service.

In respect of this service, the person liable to pay service tax is:

(a) the Director General of Posts and Telegraphs, referred to in clause (6) of section 3 of the Indian Telegraph Act, 1885 (13 of 1885); or

(b) the Chairman-cum-Managing Director, Mahanagar Telephone Nigam Limited, Delhi, a company registered under the Companies Act, 1956 (1 of 1956); or

(c) any other person who has been granted a license by the Central Government under the first proviso to sub-section (1) of section 4 of the Indian Telegraph Act, 1885 (13 of 1885)

[Rule 2(1) (d) (i) of STR, 1994]


2] General Insurance Service

In relation to General Insurance business, the insurer or reinsurer, providing such service is liable to pay service tax.

In respect of this service, the person liable to pay service tax is:

(a) the Chairman of the General Insurance Corporation of India, Mumbai; or

(b) the Chairman-cum-Managing Director of the National Insurance Company Limited, Calcutta; or

(c) the Chairman-cum-Managing Director of the New India Assurance Company Limited, Mumbai; or

(d) the Chairman-cum-Managing Director of the Oriental Insurance Company Limited, Delhi; or


(e) the Chairman-cum-Managing Director of the United India Insurance Company Limited, Chennai; or

(f) any other person carrying on general insurance business and who has obtained a certificate of registration under section 3 of the Insurance Act, 1938 (4 of 1938);

[Rule 2(1) (d) (ii) of STR, 1994]

3] Insurance Auxiliary Service

The person liable to pay service tax in relation to insurance auxiliary services by an insurance agent is any person carrying on general insurance business in India or the life insurance business.

In other words, the insurance company (and not the insurance agent) which has appointed the insurance agent is liable to pay service tax.

[Rule 2(1) (d) (iii) of STR, 1994]

4] Import of Services

For, taxable services provided by any person from a country other than India and received by any person in India, the liability to pay service tax is on the service recipient.

[Rule 2(1) (d) (iv) of STR, 1994]


5] Transport of Goods by Road


For services provided by a Goods Transport Agency, when the consignor or consignee belongs to specified category mentioned below, then the liability to pay service tax is on the service recipient.

(a) any factory registered under or governed by the Factories Act, 1948 (63 of 1948);

(b) any company formed or registered under the Companies Act, 1956 (1 of 1956);

(c) any corporation established by or under any law;

(d) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India;

(e) any co-operative society established by or under any law;

(f) any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made there under; or

(g) any body corporate established, or a partnership firm registered, by or under any law.

(h) any person who pays or is liable to pay freight either himself or through his agent for the transportation of such goods by road in a goods carriage;

[Rule 2(1) (d) (v) of STR, 1994]

6] Business Auxiliary Service

In relation to business auxiliary service of mutual fund by a mutual fund distributor or an agent, the liability to pay service tax has been shifted from the mutual fund distributor or agent to the mutual fund or asset Management Company receiving such service.

[Rule 2(1) (d) (vi) of STR, 1994]

7] Sponsorship Service

Sponsorship service provided to any Body Corporate or Firm located in India, the Body Corporate or Firm who receives such sponsorship service is liable to pay service tax.

E.g. Quiz competition is organized by Lions Club. Company X sponsors the event and agrees to bear the expenses of providing prizes, cost of travel to the judges, snacks for children, cost of trophies etc.

Such sponsorship by company X is taxable as the services are provided to a body corporate or firm.

The event in such case is organized by Lions Club but services are received by company X and therefore X is liable to pay service tax.

[Rule 2(1) (d) (vii) of STR, 1994]




Category Service Tax, Other Articles by - Kaustubh Ram Karandikar 



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