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This is my first Article in this i would like to share some thing about Service Vs Business. To differentiate between Service and Business is very important because

1) Services are liable for Service tax whereas business is liable for Sale tax, Vat, excise duty, customs duty, octroi etc and

2) For Services threshold limit for compulsory tax audit under section 44AB is Rs.15,00,000/- of Gross receipts and for Business it is Rs.60,00,000/- of Gross Turnover from A.Y.2011-12.           

Service means earning Income by way of exchange of their Ideas and Knowledge or providing some facilities (like providing telephone facilities, Helping in marriage works etc. such type) but Business means earning profit by way of sale of goods either direct or by converting into another form(ex:- Manufacturers)

Service may not be profit Motive for example helping to the poor people in financial matters or other way without any consideration is Social Service but Business must and should profit Motive.

There is no transfer of goods or physical items in service but Business involves transfer of goods and physical items.

Plying of Lorries comes under Service because there is no sale of goods just transfers the goods from one place to another by the customer requirement and it is liable for service tax. All the transport sectors comes under Service. Letting of house property, plant and machinery etc are comes under Service because there is no sale and the Owner provides some facility to the customers. Chartered Accountants, Company Secretaries, Cost Accountants, Lawyers, Doctors, cinema actors, Directors, Engineers, Beauty Parlors, etc… comes under Service. Banking activities are comes under Service.

Commission agents come under business because they sold their company’s products by way of explaining its features and benefits. Example Life Insurance Corporation of India agents sold LIC policies to the public. Who doing Business is called as Traders, Manufactures, Agents, Brokers but travel agents do not comes under business because they provides booking of tickets, guidance to the passengers etc.

Producers of the Cinema doesn’t comes under Service because they manufacturing a picture and then sold to the distributors. Contractors comes under business because they purchase raw materials and constructed or produced a final product Share brokering are comes under business because they sold company’s share for which it would be agreed or tie up.

If a professional working on Salary basis even though comes under service not liable for service tax because employer and employee relationship exists. For example A Chartered Accountant working in a company and receives salary not liable to service tax because employer and employee relationship exists and no question of receipts.

In one word the transaction which involves transfer of goods and its ownership comes under Business activity and which doesn’t involves transfer of ownership of goods comes under Service activity even-though transfer of goods taken place for Ex. Transfer of goods from one place to customers place (Godown or storage place) by transport authorities like by way of road, rail, air, water doesn’t mean transfer of owner ship of goods. So the activity between the transporter and the customer is service whereas seller and the customer is business.

But every sale doesn’t consider as Business activity for example sale of capital assets doesn’t mean business activity. Here I didn’t explaining about capital asset..

A trader who sold his products or purchase goods to his customer with low price than market or no profit doesn’t mean service because sale of goods involves business activity.

Which transactions would be called as Business transaction? Who frequently purchases the goods and sold is called Business transaction For example for the Furniture trader sale of furniture is Business activity whereas for the household human being who sold furniture at his home who bought for purpose of use in the house or office or at his work place is called capital asset and doesn’t Business activity.

In my view educational institutions are comes under service because they sharing their knowledge with others however teachers or lecturers or professors working in that organization on salary basis come under Salary category.

Note: The above Information I didn’t get from any source I said few words about the above topic which learned in my practice with practical nature and analyzed I saw so many peoples getting confusion about difference between these particularly students for that in simple words I explained.

May be I am wrong? Please correct me with proper explanation.

I request to each and every reader please comment on my topic show my mistakes if any and correct me. Post every comment either negative or positive to me.

Please excuse me if I do any mistake or my concept totally wrong.

Thanking you to each and every reader and commenter.

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Dintakurthi Tirumala
(CA FINAL)
Category Audit   Report

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