Taxability, Negative list & Exemptions in Service Tax
Charge of Service Tax: On All service unless specified in Negative list or Exempt.
Not a service - So Not taxable:
(i) Sale, Gift
(ii) Deemed Sale (Article 366 of the Constitution)
(iii) Transaction in money or actionable claim
(iv) Service by an employee to the employer in the course of employment;
(v) Fees taken in any Court or tribunal
(vi) Functions by Members of Parliament / State Legislative / Panchayats / Municipalities; or
(vii) Duties performed by person who holds post as per provisions of Constitution (E.g CAG)
(viii) Duties performed by person as a Chairperson or a Member in a body established by the CG or SG or local authority. (E.g. Service by president of ICAI as a president)
(ix) An artist performing on a street where passersby may drop some coins in his bowl kept either after feeling rejoiced.
(x) Large number of governmental activities for citizens
(xi) Personal obligations e.g. pocket money
(xii) Amount paid as alimony for divorce (xii) Donations without conditions
(xiii) Tips and ex-gratia payments
(xiv) Award is received in consideration for life time contribution
(Reason - There is no immediate connection. E.g. Nobel Prize)
Only one person involved - So Not Taxable:
Services provided by one branch of a company to another or to its head office or vice-versa
Deemed Distinct Person - So taxable:
(i) Services by an unincorporated association to its members and vice versa.
(ii) Services by an establishment of a person in the taxable territory to any of his other establishment in a non-taxable territory and vice versa.
(iii) Services provided by the members of the Joint Venture (JV) to the JV and vice versa or between the members of the JV
For Service = Activity + Consideration. So if No Consideration - No Service. So Not Taxable:
(i) Fine or penalty for violation of law.
(ii) Security deposit forfeited for accidental damages not relatable to provision of service.
(iii) Excess amount received if returned.
Negative list of services [Section 66D] - Not Taxable:
(i) Services provided by Government or a local authority:
- Basic mail, inland letter, registered post, transfer of money through money orders, operation of savings accounts, issue of postal orders & pension payments.
- All other services not specified in taxable list.
(ii) Services provided by the Reserve Bank of India.
(iii) Services provided by a foreign diplomatic mission located in India
(iv) Services relating to agriculture or agricultural produce (Agriculture produce does not include Rice):
- Cultivation, harvesting, threshing, plant protection or testing.
- Pisciculture (Fish), sericulture (Silk), floriculture (Flower), horticulture (Vegetable), forestry.
- Supply of farm labour.
- Processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging etc., which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market;
- Renting of agro machinery or vacant land with or without a structure;
- Loading, unloading, packing, storage or warehousing of agricultural produce;
- Agricultural extension services (farmer education or training)
- Services by any Agricultural Produce Marketing Committee (APMC)
- Service by a commission agent for sale or purchase of agricultural produce;
(v) Trading of goods (Including Forwards/ Futures).
(vi) Any process amounting to manufacture or production of goods
(vii) Selling of space or time slots for advertisements in print media only: “Print media” means: “Book” & " News Paper" as defined Press and Registration of Books Act, 1867, but does not include business directories, yellow pages and trade catalogues which are primarily meant for commercial purposes;
(viii) Service by way of access to a road or a bridge on payment of toll charges.
(ix) Betting, gambling or lottery Service.
(x) Transmission or distribution of electricity. (xi) Education Services:
- Pre-school education and education up to higher secondary school; (CBSC, ICSE, SSC, HSC, International School)
- Education as a part of a curriculum for obtaining a qualification recognised by law (B.Com)
- Education as a part of an approved vocational education course.
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