Applicabitily of service tax

Earlier the word "Service" was not defined anywhere in Chapter V of the Finance Act, 1994. In order to ensure wide coverage of services under the ambid of service tax, the term 'Service' has been defined under the new inserted section 65B(44) in the Finance Act, 2012, which reads as follows-

"Service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include—

a) an activity which constitutes merely,––

i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or

ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution; or

iii) a transaction in money or actionable claim.

b) a provision of service by an employee to the employer in the course of or in relation to his employment;

c) fees taken in any Court or tribunal established under any law for the time being in force."²

The definition prescribes the following three essential ingredients that must be present in order to call an activity as 'service'-

a) it must be an activity;

b) it must be performed by a person for another person;

c) the activity is performed for a consideration.

In the absence of any of these essential ingredients, the activity will be not be considered as service. Also, the activities which are covered under the declared service category will automatically become service.

Thereafter, the definition expressly excludes the activities from the provision of "Service". Thus, except for the activities as mentioned in the definition of the term "Service", all other activities shall be covered which involves the above three essential ingredients.