108. TRANSPORT OF GOODS BY AIR SERVICES
(A) Date of Introduction: 10.09.2004 vide Section 90 of Finance (No.2), Act, 2004
(B) Definition and scope of service:
“Aircraft” has the meaning assigned to it in clause (1) of section 2 of the Aircraft Act,
1934 (22 of 1934);
(Section 65(3a) of Finance Act, 1994 as amended)
“Aircraft operator” means any person which provides the service of transport of
goods or passengers by aircraft;
(Section 65(3b) of Finance Act, 1994 as amended)
“Taxable Service” means any service provided or to be provided to any person, by
air craft operator, in relation to transport of goods by aircraft;
(Section 65 (105) (zzn) of Finance Act, 1994 as amended)
(C) Rate of Tax & Accounting Code:
Rate of Tax Accounting Code
Service Tax 10% of the value of
services
00440266
Education Cess 2% of the service tax
payable
00440298
Secondary and
Higher Education
cess
1% of the service tax
payable.
00440426
Other –
Penalty/interest
As levied or applicable 00440267
( Rate of tax is effective from 24.02.2009.)
( D ) Classification of Taxable Services:
(1) The classification of taxable services shall be determined according to
the terms of the sub-clauses (105) of section 65;
(2) When for any reason , a taxable service is prima facie, classifiable under two
or more sub-clauses of clause (105) of section 65, classification shall be
effected as follows :-
(a) the sub-clause which provides the most specific descripttion shall be preferred
to sub-clauses providing a more general descripttion;
(b) composite services consisting of a combination of different services which
cannot be classified in the manner specified in clause (a), shall be classified
as if they consisted of a service which gives them their essential character, in
so far as this criterion is applicable; (c) when a service cannot be classified in the manner specified in clause (a) or
clause (b), it shall be classified under the sub-clause which occurs first among
the sub-clauses which equally merits consideration.
( Sec.65A of Finance Act,1994)
(E) Valuation of taxable services for charging Service tax
(1) Service tax chargeable on any taxable service with reference to its value shall,—
(i) in a case where the provision of service is for a consideration in money, be the gross
amount charged by the service provider for such service provided or to be provided by
him;
(ii) in a case where the provision of service is for a consideration not wholly or partly
consisting of money, be such amount in money, with the addition of service tax charged,
is equivalent to the consideration;
(iii) in a case where the provision of service is for a consideration which is not
ascertainable, be the amount as may be determined in the prescribed manner.
(2) Where the gross amount charged by a service provider, for the service provided or to be
provided is inclusive of service tax payable, the value of such taxable service shall be
such amount as, with the addition of tax payable, is equal to the gross amount charged.
(3) The gross amount charged for the taxable service shall include any amount received
towards the taxable service before, during or after provision of such service.
(4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined
in such manner as may be prescribed.
Explanation.—For the purposes of this section,—
(a) “consideration” includes any amount that is payable for the taxable services
provided or to be provided;
(b) “money” includes any currency, cheque, promissory note, letter of credit, draft, pay
order, travellers cheque, money order, postal remittance and other similar instruments
but does not include currency that is held for its numismatic value;
(c) “gross amount charged” includes payment by cheque, credit card, deduction from
account and any form of payment by issue of credit notes or debit notes and ‘book
adjustment, and any amount credited or debited, as the case may be, to any account,
whether called “Suspense account” or by any other name, in the books of account of a
person liable to pay service tax, where the transaction of taxable service is with any
associated enterprise.
( Sec.67 of Finance Act,1994)
Inclusion in or Exclusion from value of certain expenditure or cost: (1) Where any expenditure or costs are incurred by the service provider in the course
of providing taxable service, all such expenditure or costs shall be treated as consideration
for the taxable service provided or to be provided and shall be included in the value for the
purpose of charging service tax on the said service.
[Rule 5(1) of Service Tax (Determination of Value) Rules,2006)]
(2) The expenditure or costs incurred by the service provider as a pure agent of the
recipient of service, shall be excluded from the value of the taxable service if all the
following conditions are satisfied, namely:-
(i) the service provider acts as a pure agent of the recipient of service when he
makes payment to third party for the goods or services procured;
(ii) the recipient of service receives and uses the goods or services so procured
by the service provider in his capacity as pure agent of the recipient of
service;
(iii) the recipient of service is liable to make payment to the third party;
(iv) the recipient of service authorizes the service provider to make payment on
his behalf;
(v) the recipient of service knows that the goods and services for which payment
has been made by the service provider shall be provided by the third party;
(vi) the payment made by the service provider on behalf of the recipient of
service has been separately indicated in the invoice issued by the service
provider to the recipient of service;
(vii) the service provider recovers from the recipient of service only such amount
as has been paid by him to the third party; and
(viii) the goods or services procured by the service provider from the third party as
a pure agent of the recipient of service are in addition to the services he
provides on his own account.
[Rule 5(2) of Service Tax (Determination of Value) Rules,2006)]
(F) Clarifications issued by the Board:
Scope of Transport of goods by air: Services provided by an aircraft operator in relation
to transport of goods by an aircraft falls under this category. Thus, in addition to the actual
air-freight charges, all charges collected towards storing, handling, loading/unloading (done
in relation to air transportation of cargo) by an airlines are also chargeable to this levy.
[Vide CBEC Circular no.80/10/2004-S.T.,dated 17.9.2004]
(G) Exemption & Exclusion:
1. Exemption to Small Scale Service Providers: In exercise of the powers conferred by sub-section (1) of section 93 of the
Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said Finance Act), the Central
Government, on being satisfied that it is necessary in the public interest so to do, hereby
exempts taxable services of aggregate value not exceeding Ten lakh* rupees in any
financial year from the whole of the service tax leviable thereon under section 66 of the said
Finance Act:
Provided that nothing contained in this notification shall apply to,-
(i) taxable services provided by a person under a brand name or trade name,
whether registered or not, of another person; or
(ii) such value of taxable services in respect of which service tax shall be paid by such
person and in such manner as specified under sub-section (2) of section 68 of the
said Finance Act read with Service Tax Rules,1994.
2. The exemption contained in this notification shall apply subject to the following
conditions, namely:-
(i) the provider of taxable service has the option not to avail the exemption contained in
this notification and pay service tax on the taxable services provided by him and such
option, once exercised in a financial year, shall not be withdrawn during the remaining part
of such financial year;
(ii) the provider of taxable service shall not avail the CENVAT credit of service tax paid on
any input services, under rule 3 or rule 13 of the CENVAT Credit Rules, 2004 (herein after
referred to as the said rules), used for providing the said taxable service, for which
exemption from payment of service tax under this notification is availed of;
(iii) the provider of taxable service shall not avail the CENVAT credit under rule 3 of the
said rules, on capital goods received in the premises of provider of such taxable service
during the period in which the service provider avails exemption from payment of service
tax under this notification;
(iv) the provider of taxable service shall avail the CENVAT credit only on such inputs or
input services received, on or after the date on which the service provider starts paying
service tax, and used for the provision of taxable services for which service tax is payable;
(v) the provider of taxable service who starts availing exemption under this notification
shall be required to pay an amount equivalent to the CENVAT credit taken by him, if any, in
respect of such inputs lying in stock or in process on the date on which the provider of
taxable service starts availing exemption under this notification;
(vi) the balance of CENVAT credit lying unutilised in the account of the taxable service
provider after deducting the amount referred to in sub-paragraph (v), if any, shall not be
utilised in terms of provision under sub-rule (4) of rule 3 of the said rules and shall lapse on
the day such service provider starts availing the exemption under this notification;
(vii) where a taxable service provider provides one or more taxable services from one or
more premises, the exemption under this notification shall apply to the aggregate value of
all such taxable services and from all such premises and not separately for each
premises or each services; and
(viii) the aggregate value of taxable services rendered by a provider of taxable service
from one or more premises, does not exceed rupees *ten lakhs in the preceding financial
year.
3. For the purposes of determining aggregate value not exceeding ten*lakh rupees, to avail
exemption under this notification, in relation to taxable service provided by a goods
transport agency, the payment received towards the gross amount charged by such goods
transport agency under section 67 for which the person liable for paying service tax is as
specified under subsection (2) of section 68 of the said Finance Act read with Service Tax
Rules, 1994, shall not be taken into account.
Explanation.- For the purposes of this notification,-
(A) “brand name” or “trade name” means a brand name or a trade name, whether
registered or not, that is to say, a name or a mark, such as symbol, monogram, logo,
label, signature, or invented word or writing which is used in relation to such specified
services for the purpose of indicating, or so as to indicate a connection in the course of
trade between such specified services and some person using such name or mark with
or without any indication of the identity of that person;
(B) “aggregate value not exceeding *ten lakh rupees means the sum total of first
consecutive payments received during a financial year towards the gross amount, as
prescribed under section 67 of the said Finance Act, charged by the service provider
towards taxable services till the aggregate amount of such payments is equal to ten
lakh rupees but does not include payments received towards such gross amount which
are exempt from whole of service tax leviable thereon under section 66 of the said
Finance Act under any other notification.
4. This notification shall come into force on the 1st day of April, 2005.
[Notification No. 6/2005-ST, dated 1-3-2005. *Amended by Notfn.No. 8/2008-ST
dated 01.03.2008]
2. Services to UN Agencies
Services provided to United Nations or an International Organizations are exempt.
[Notification No. 16/2002-ST, dated 2-8-2002]
3. Export of service: Any service which is taxable under clause 105 of Section 65 may be
exported without payment of service tax.
( Rule 4 of Export of Services Rules,2005)
4. Exemption to services provided to a developer of SEZ or a unit of SEZ:
Exempts the taxable services specified in clause (105) of section 65 of the said Finance Act,
which are provided in relation to the authorized operations in a Special Economic Zone, and
received by a developer or units of a Special Economic Zone, whether or not the said
taxable services are provided inside the Special Economic Zone, from the whole of the
service tax leviable thereon under section 66 of the said Finance Act subject to certain
conditions. ( Refer notification for details)
{ Notification No. 09/2009ST dated 03.03.2009 (Prior to 03.03.2009 Notfn.No4/2004-ST
dated 31.03.2004)}
5. Exemption to value of goods & material sold by service provider: In exercise of
the powers conferred by section 93 of the Finance Act, 1994 (32 of 1994), the Central
Government, being satisfied that it is necessary in the public interest so to do, hereby
exempts so much of the value of all the taxable services, as is equal to the value of goods
and materials sold by the service provider to the recipient of service, from the service tax
leviable thereon under section (66) of the said Act, subject to condition that there is
documentary proof specifically indicating the value of the said goods and materials.
(Notification No. 12/2003-ST dated 20.06.2003 effective from 01.07.2003) 6. Exemption to taxable services provided by TBI and STEP: All taxable services,
provided by a Technology Business Incubator (TBI) or a Science and Technology
Entrepreneurship Park (STEP) recognized by the National Science and technology
Entrepreneurship Development Board (NSTEDB) of the Department of Science and
Technology, Govt. of India from the whole of the service tax leviable thereon subject tio
certain conditions and procedures. ( Refer notification for details)
(Notification No.09/2007 ST dated 01.03.2007)
7. Exemption to taxable services provided by entrepreneurs located within the
premises of TBI or STEP: All taxable services, provided by an entrepreneur located
within the premises of a Technology Business Incubator (TBI) or a Science and Technology
Entrepreneurship Park (STEP) recognized by the National Science and technology
Entrepreneurship Development Board (NSTEDB) of the Department of Science and
Technology, Govt. of India from the whole of the service tax leviable thereon subject to
certain conditions and procedures. ( Refer notification for details)
(Notification No.10/2007 ST dated 01.03.2007)
8. Exemption to services provided to Foreign Diplomatic Missions or Consular Post
in India: All services provided by any person, for the official use of a Foreign Diplomatic
Mission or Consular Post in India are exempted from service tax subject to certain
conditions and procedures. (Refer notification for details)
(Notification No. 33/2007-ST dated 23.05.2007)
9. Exemption to services provided for personal use of a family member of
Diplomatic Agent or Career Consular Officers posted in Foreign Diplomatic
Mission/Consular Post in India: All services provided by any person, for personal use of
family member of Diplomatic Agents or Career Consular officers posted in a Foreign
Diplomatic Mission or Consular Post in India are exempted from service tax subject to
certain conditions and procedures. (Refer notification for details)
(Notification No. 34/2007-ST dated 23.05.2007)
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