BASIC CONCEPTS - Taxmann · BASIC CONCEPTS 1 OVERVIEW OF THE NEW SCHEME OF TAXATION 1.1 Introduction 3 1.2 Negative list - The concept 4 1.3 Overview of the new legislative scheme

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I-17

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About the authors I-5

Acknowledgement I-7

A few words from the authors I-9

Chapter-heads I-13

PART A

BASIC CONCEPTS

1

OVERVIEW OF THE NEW SCHEMEOF TAXATION

1.1 Introduction 3

1.2 Negative list - The concept 4

1.3 Overview of the new legislative scheme 5

1.3-1 New provisions under Chapter V of the Act 5

1.3-2 Introduction of Place of Provision of Services Rules, 2012 6

1.3-3 Amendments in the previously applicable rules 6

1.3-4 Exemption notifications 6

1.3-5 Rebate/refund notifications 7

1.3-6 Discontinuation of the earlier statutory provisions and rules 8

1.3-7 Withdrawal of earlier notifications and circulars 8

Annex 1.1 : Service tax proposals in Finance Minister�s Budget Speechfor financial year 2012-13 9

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CONTENTS I-18

2

SERVICE - DEFINITION, INCLUSIONSAND EXCLUSIONS

2.1 Introduction 11

2.2 The statutory provision 11

2.3 Framework of section 65B(44) 12

2.4 Activity 12

2.5 Consideration 13

2.5-1 Consideration need not flow from the service receiver 13

2.5-2 Consideration may be monetary or non-monetary 13

2.5-3 Concept of consideration under the EU VAT laws 16

2.5-4 Some key international decisions on the concept ofconsideration 16

2.6 The activity must be carried out by one person for another 25

2.6-1 Meaning of person 25

2.6-2 Exceptions to the general rule �the activity must becarried out by one person for another� 25

2.7 Services include declared services 26

2.8 Specific exclusions 26

2.8-1 Transfer of title in goods or in immovable property 27

2.8-2 Deemed sales 30

2.8-3 Transactions only in money 30

2.8-4 Actionable claims 31

2.8-5 Services of employees 32

2.8-6 Fee taken in a court or a tribunal 33

2.8-7 Sovereign government functions 33

2.9 Some problems on section 65B(44) 35

Annex 2.1 : Whether �donation� is �consideration� for a charitablefoundation imparting free training to the poor 37

Annex 2.2 : Whether market/licence fee is consideration for Servicesprovided by the Agricultural Produce MarketingCommittee (APMC)/Board 38

Annex 2.3 : Draft Circular on leviability of service tax on staff benefitsand employment related transactions 39

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I-19 CONTENTS

3

DECLARED SERVICES

3.1 Introduction 41

3.2 The statutory provisions 41

3.3 Framework of section 65B(22) 41

3.4 Declared service - The concept 41

3.5 Activities covered under the list of declared services [Section 66E] 42

3.5-1 Renting of immovable property 42

3.5-2 Construction activities 42

3.5-3 Intellectual property services 43

3.5-4 Information technology software services 43

3.5-5 Passive actions 43

3.5-6 Hiring of goods services 43

3.5-7 Hire purchase or sale by installment services 43

3.5-8 Works contract services 43

3.5-9 Catering and restaurant services 44

4

TAXABLE TERRITORY

4.1 Introduction 45

4.2 Definitions of taxable territory and non-taxable territory 45

4.3 Chapter V of the Act applies to the whole of India except Jammuand Kashmir 45

4.4 Definition of India 45

4.5 Territory of the Union of India 46

4.6 Territorial waters of India 46

4.7 Continental shelf of India 46

4.8 Exclusive economic zone of India 47

4.9 Installation, structures and vessel 47

4.10 Applicability of Chapter V of Finance Act under the erstwhilepositive list regime 47

4.11 Problems on taxable territory 48

5

REVERSE CHARGE (TAX SHIFT)

5.1 Introduction 52

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CONTENTS I-20

5.2 Specific services liable to tax under reverse charge mechanism 52

5.3 Extent of reverse charge liability 53

5.4 Point of reverse charge taxation 55

5.5 Refund of Cenvat Credit to service providers providing servicestaxed on reverse charge basis 56

5.6 Small scale exemption not applicable on services liable to reversecharge 56

5.7 Reverse charge applicable even where service recipient rendersnon-taxable or exempt services 56

5.8 Import of services by government, individuals and charitableinstitutions not liable to reverse charge 57

5.9 Registration requirement for recipient of services liable to reversecharge 57

5.10 Invoicing of services liable to reverse charge 57

5.11 CENVAT credit cannot be utilized for discharge of reverse chargeliability 58

5.12 CENVAT credit of service tax paid under reverse chargemechanism 58

5.13 Problems on reverse charge mechanism 58

5.14 Case studies on reverse charge mechanism 62

6

METHODS FOR VALUATION OF SERVICES

6.1 Introduction 66


6.2-1 Framework of sections 67 and 67A 67

6.2-2 Valuation of taxable service where consideration is inmoney [Section 67(1)(i)] 68

6.2-3 Valuation of taxable service where consideration is notwholly or partly in money [Section 67(1)(ii)] 69

6.2-4 Valuation of taxable service where consideration notascertainable [Section 67(1)(iii)] 69

6.2-5 Valuation of taxable service where gross amount chargedis cum-service tax [Section 67(2)] 69

6.2-6 Time of receipt (or payment) of consideration is irrelevantfor valuation purposes [Section 67(3)] 69

6.2-7 Powers of Central Government to frame rules[Section 67(4)] 70

6.3 The scheme of the Service Tax (Determination of Value)Rules, 2006 70

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I-21 CONTENTS

6.4 Determination of value of services involved in execution of workscontract [Rule 2A] 70

6.4-1 The statutory provision 70

6.4-2 Framework of Rule 2A 72

6.4-3 Actual deduction method [Rule 2A(i)] 72

6.4-4 Abatement/deemed deduction method [Rule 2A(ii)] 74

6.4-5 Bar on availing CENVAT Credit on goods 75

6.5 Determination of value of services in relation to money changing[Rule 2B] 75

6.5-1 The statutory provisions 75

6.5-2 Framework of the relevant rules 76

6.5-3 Currency exchanged from/to INR 77

6.5-4 Where neither of the currencies exchanged is INR 78

6.5-5 Composition scheme for money changing services 78

6.6 Determination of value of taxable involved in supply of food anddrinks in a restaurant or as outdoor catering [Rule 2C] 79


6.6-2 Framework of Rule 2C 80

6.6-3 Restaurant services 80

6.6-4 Outdoor catering services 80

6.6-5 Meaning of total amount 80

6.6-6 Bar on availing CENVAT Credit on goods meant forhuman consumption 81

6.7 Determination of value of a taxable service where considerationfor such service is unascertainable [Rule 3] 81


6.7-2 Framework of Rule 3 82

6.7-3 Determination of value of taxable service is the serviceprovider�s prerogative 82

6.7-4 Where value of similar services is available [Rule 3(a)] 83

6.7-5 Where value of similar services is not available [Rule 3(b)] 84

6.8 Power of Central Excise Officer to reject value [Rule 4] 85

6.9 Deductibility of expenses [Rule 5] 85



6.9-3 The general rule [Rule 5(1)] 87

6.9-4 Exclusion of expenses incurred as pure agent [Rule 5(2)] 89

6.9-5 Meaning of pure agent 89

6.9-6 Conditions for exclusion of expenses 89

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CONTENTS I-22

6.9-7 Examples of costs and expenses to be excluded fromvalue of a taxable service 90

6.9-8 Deductibility of out of pocket expenses - Position prior to18-4-2006 90

6.9-9 Deductibility of out of pocket expenses - Internationalexperience 94

6.10 Service specific inclusions/exclusions [Rule 6] 94



6.10-3 Specific inclusions [Rule 6(1)] 96

6.10-4 Specific exclusions [Rule 6(2)] 99

6.11 Compounding schemes for determination of value under theService Tax Rules, 1994 100

6.12 Problems on valuation of services 102

Annex 6.1 : Departmental Clarifications on valuation rules 108

Annex 6.2 : Departmental clarifications on valuation of services 110

Annex 6.3 : Clarifications regarding service tax on Authorised servicestation for service, repair, reconditioning or restoration ofmotor cars and two-wheeled motor vehicles 113

Annex 6.4 : Departmental clarifications on valuation rules 114

7

SERVICES UNDER THE NEGATIVE LIST

7.1 Introduction 115


7.3 Negative list - The concept 115

7.4 List of activities covered under the negative list [Section 66D] 116

7.4-1 Services by Government or a local authority 116

7.4-2 Services by the Reserve Bank of India 116

7.4-3 Services by a foreign diplomatic mission located in India 117

7.4-4 Agricultural services 117

7.4-5 Trading of goods 117

7.4-6 Process amounting to manufacture or production of goods 118

7.4-7 Selling of space or time slots for advertisements 118

7.4-8 Services by way of access to a road or a bridge on paymentof toll charges 118

7.4-9 Betting, gambling or lottery 118

7.4-10 Admission to entertainment events or access toamusement facilities 118

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I-23 CONTENTS

7.4-11 Transmission or distribution of electricity 119

7.4-12 Education services 119

7.4-13 Services by way of renting of residential dwelling for useas residence 119

7.4-14 Specified financial transactions 119

7.4-15 Transportation of passengers 119

7.4-16 Transportation of goods 120

7.4-17 Cremation services 120

7.5 Problems on the negative list [Section 66D] 120

8

GENERAL EXEMPTIONS


8.2 Small scale exemption 125

8.2-1 Meaning of aggregate value 125

8.2-2 CENVAT credit restrictions on service providers claimingsmall scale exemption 126

8.2-3 Persons not eligible to claim small scale exemption 127

8.2-4 Small scale exemption is optional 127

8.3 Exemption on services to SEZ 128

8.4 Exemption to the extent of R&D cess paid 128

8.5 Exemption on services to foreign diplomatic missions 128

8.6 Exemption on services by TBI and STEP 128

8.7 Exemption from education cess and secondary and highereducation cess 129

8.8 Exemption under Focus Market Scheme 129

8.9 Exemption under Focus Product Scheme 131

8.10 Exemption under Vishesh Krishi and Gram Udyog Yojana 131A

8.11 Problems on general exemptions 131C

Annex 8.1 : Exemption from Education Cess and Secondary andHigher Education Cess 132

9

SPECIFIC EXEMPTIONS


9.2 Categorization of exemptions under Mega Exemption Notification 133

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CONTENTS I-24

9.3 Exemptions on services in the public interest 133

9.3-1 Medical and health care services 134

9.3-2 Services in relation to charitable activities 135

9.3-3 Services in relation to religious activities 136

9.3-4 Legal services 137

9.3-5 Services ancillary to education services 138

9.3-6 General insurance services under specified schemes 138

9.3-7 Employee State Insurance Corporation�s Services 139

9.3-8 Specified services rendered to Government or localauthority or governmental authority 139

9.3-9 Public facilities 140

9.4 Exemptions on services related to arts, culture or sports 140

9.5 Exemptions on construction services 142

9.5-1 Specified services provided to the Government or localauthority or Governmental authority 142

9.5-2 Construction, maintenance, repairs etc. of specifiedpublic infrastructure/utilities 142

9.5-3 Erection or construction of specified original works 143

9.5-4 Exemption to sub-contractors 144

9.6 Exemptions on hospitality services 144

9.6-1 Renting of hotel, inn, guest house etc. 144


9.7 Exemptions on transport related services 145

9.7-1 Inland transport of specified goods by rail or vessel 145

9.7-2 Specified services provided by goods transport agency 145

9.7-3 Specified services of giving means of transport on hire 146

9.7-4 Specified services of transport of passengers 147

9.7-5 Motor vehicle parking services 147

9.8 Exemptions on intermediary services 148

9.9 Exemptions on intermediate production processes 150

9.10 Exemptions on international transactions 151

9.10-1 Business exhibitions held outside India 151

9.10-2 Services by service providers located in a non-taxableterritory 151

9.11 Other exemptions 151

9.11-1 Services provided to the United Nations or a specifiedinternational organization 151

9.11-2 Copyright services 152

9.11-3 Services by an independent journalist/specified newsagencies 154

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I-25 CONTENTS

9.11-4 Services by an incubatee up to a total business turnoverof INR fifty lakh 154

9.11-5 Services by an unincorporated body or a registered society 154

9.11-6 Slaughtering of animals 157

9.11-7 Transfer of a going concern 157

9.11-8 Services by governmental authority 157

9.12 Problems on exemptions 157

10

SERVICE TAX ABATEMENTS


10.2 Categorization of services eligible for abatement under AbatementNotification 165

10.3 Abatement on financial leasing including hire purchase 165

10.3-1 Meaning of amount charged for application of abatement 166

10.4 Abatements on goods transportation services 166

10.4-1 Abatement on transport of goods by rail 166

10.4-2 Abatement on transport of goods by road by goodstransport agency 166

10.4-3 Abatement on transport of goods in a vessel from oneport in India to another 166

10.5 Abatement on passenger transportation services 167

10.5-1 Abatement on transport of passengers by rail 167

10.5-2 Abatement on transport of passengers by air 167

10.6 Abatements on renting activities 167

10.6-1 Abatement on renting of hotel, inns, guest houses etc. 167

10.6-2 Abatement on renting of any motor vehicle designed tocarry passengers 168

10.7 Abatement on catering services 168

10.7-1 Meaning of amount charged for catering services 168

10.8 Abatement to services related to chit 168

10.8-1 Meaning of chit 169

10.9 Abatements on tour operator�s services 169

10.9-1 Meaning of a tour operator 169

10.9-2 Services in relation to a package tour 169

10.9-3 Services solely by way of arranging or bookingaccommodation 169

10.9-4 Other services in relation to a tour 170

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CONTENTS I-26

10.10 Abatement on Construction activities 170

10.10-1 Position with effect from 1-3-2013 170

10.10-2 Conditions for claiming abatement 171

10.10-3 Meaning of amount charged 171

11

RULES OF INTERPRETATION



11.3 Framework of Section 66F 173

11.4 Reference to a service does not cover reference to a service usedfor providing such service [Section 66F(1)] 173

11.4-1 Exceptions to the rule that reference to a service does notcover reference to service used for providing such service 174

11.5 Specific description prevails over general description[Section 66F(2)] 175

11.6 Taxability of bundled services [Section 66F(3)] 176

11.6-1 Where various elements of service are naturally bundled[Section 66F(3)(i)] 177

11.6-2 Where various elements of service are not naturallybundled [Section 66F(3)(ii)] 178

11.7 Some key ECJ decisions on classification of services 178

12

POINT OF TAXATION RULES


12.2 The statutory provisions under the Act 182

12.3 Point of Taxation Rules, 2011 182

12.4 The scheme of the Point of Taxation Rules, 2011 183

12.5 Power of Central Excise Officer to determine point of taxation[Rule 8A] 183

12.6 Applicability, saving and transition provisions [Rules 1 and 9] 183

12.7 Default rule (Rule 3) - Introduction 184

12.8 The relevant basic concepts to understand applicability of rule 3 184

12.9 Statutory time limit for issuance of invoice 185

12.9-1 Meaning of invoice 185

12.10 Date of payment/receipt of payment 185

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I-27 CONTENTS

12.11 Date of completion of service 186

12.11-1 Date of completion of service in case of continuous supplyof service 186

12.12 Framework of Rule 3 187

12.13 Where the invoice is issued within the statutory time limit 187

12.14 Where the invoice is not issued within the statutory time limit 188

12.15 Point of taxation of advance receipts 188

12.15-1 Exception - Point of taxation of advances upto INR 1000 189

12.16 Rule 3 - In summary 189

12.17 Rule for determining point of taxation in case of change in effectivetax rate (Rule 4) - Introduction 190


12.19 Meaning of change in effective rate of tax 191

12.19-1 History 191


12.21 Where the taxable service has been provided before the change ineffective rate of tax 191

12.21-1 Invoice issued and payment received after the change ineffective rate of tax 192

12.21-2 Invoice issued prior to but payment received after thechange in effective rate of tax 192

12.21-3 Payment received prior to but invoice issued after thechange in effective rate of tax 192

12.22 Where the taxable service has been provided after the change ineffective rate of tax 193

12.22-1 Invoice issued prior to but payment received after thechange in effective rate of tax 193

12.22-2 Invoice issued and payment received prior to the changein effective rate of tax 193

12.22-3 Payment received prior to but invoice issued after thechange in effective rate of tax 194

12.23 Clarification issued on determination of point of taxation in relationto air travel tickets 194

12.24 Rule 4 - In summary 194

12.25 Point of taxation of a service for the first time (Rule 5) - Introduction 195

12.26 Point of taxation as per rule 5 195

12.27 Rule 5 - Illustrations 196

12.28 Point of reverse charge taxation (Rule 7) - Introduction 196


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CONTENTS I-28

12.30 Persons liable to pay service tax under reverse charge mechanism 197

12.31 Meaning of associated enterprise 197

12.32 Framework of rule 7 197

12.33 Where the payment is made within a period of six months from thedate of invoice 197

12.34 Where the payment is made beyond the period of six months fromthe date of invoice 198

12.35 Point of taxation of service received from associated enterpriselocated outside India 198

12.36 Point of taxation in case of copyrights etc. (Rule 8) - Introduction 199

12.37 Point of taxation as per Rule 8 199

12.38 Rule 8 - Illustrations 199

Annex 12.1 : Clarifications on changes made with effect from 1-4-2012in point of taxation rules 201

Annex 12.2 : Completion of service 203

Annex 12.3 : Clarification regarding Amendments in Point of TaxationRules, 2011 and other related provisions 204

Annex 12.4 : Clarification on Point of Taxation Rules in relation toairlines 207

Annex 12.5 : Definition of associated enterprise under section 92A ofIncome-tax Act, 1961 208

Annex 12.6 : Clarification on Rate of Tax 210

13

PLACE OF PROVISION OF SERVICES RULES



13.3 Powers of Central Government 212

13.3-1 Power to frame rules to determine place of provision ofservices 212

13.3-2 Powers to notify description of services or circumstancesfor certain purposes [Rule 13] 212

13.4 Determination of taxability of a service 213

13.5 Scheme of the Place of Provision of Services Rules, 2012 214

13.6 Order of application of the rules [Rule 14] 214

13.7 Overview of the place of supply of services under the EU VAT laws 215

13.7-1 Overview of the place of supply of services under theUK VAT laws 216

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I-29 CONTENTS

13.7-2 Relevance of EU VAT and UK VAT place of supply ofservices rules for Indian Place of Provision of ServicesRules, 2012 217

13.8 Location of service provider and service recipient - Introduction 217

13.9 Relevance of location of the service provider/service recipient 218

13.10 Location of service provider [Rule 2(h)] 219

13.10-1 Who is a service provider? 219

13.10-2 Location of service provider [Rule 2(h)] 219

13.11 Location of service receiver [Rule 2(i)] 219

13.11-1 Who is a service receiver? 220

13.11-2 Definition of location of service receiver [Rule 2(i)] 220

13.12 Meaning of business establishment 221

13.12-1 Definition of the term business establishment under theEU VAT laws 221

13.12-2 Definition of the term business establishment under theUK VAT laws 221

13.13 Meaning of fixed establishment 222

13.13-1 Definition of the term fixed establishment under theEU VAT laws 223

13.13-2 Definition of the term business establishment under theUK VAT laws 223

13.14 Establishment most directly concerned with provision or use ofservice 224

13.14-1 Establishment most directly concerned with supply forthe purpose of UK place of supply rules 225

13.15 Usual place of residence 225

13.15-1 Definition of the term usual place of residence underEU VAT laws 225

13.15-2 Definition of the term usual place of residence underUK VAT Laws 226

13.16 Case studies on location of service provider/service receiverunder the Indian Place of Provision of Services Rules, 2012 226

13.17 Some key European court decisions on the concept ofestablishment 227

13.18 Rule 3 - Introduction 230


13.20 The default rule - Location of service receiver [Rule 3 - Main Rule] 231

13.21 Exception to the main rule - Location of service provider [Provisoto rule 3] 231

13.22 Illustrative list of services covered under rule 3 232

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CONTENTS I-30

13.23 Determination of place of provision of services under rule 3 - CaseStudies 232

13.23-1 Main rule - Location of the service receiver 233

13.23-2 Exception to the main rule - Location of the serviceprovider 233

13.24 Rule 3 - Relevant comparative provision(s) under the EU VAT laws 234

13.24-1 The general rule for B2B supply of services - Location ofservice receiver 234

13.24-2 The general rule for B2C supply of services - Location ofservice provider 234

13.25 Rule 3 - Relevant comparative provision(s) under the UK VAT laws 234

13.25-1 The general rule for B2B supply of services 234

13.25-2 The general rule for B2C supply of services 235



13.27-1 Order of application 235

13.28 Services in respect of goods [Rule 4(a)] 236

13.28-1 Illustrative list of services covered under Rule 4(a) -Main rule 237

13.28-2 Exception - Services provided remotely through electronicmeans [Proviso to Rule 4(a)] 237

13.28-3 Rule 4(a) - Relevant comparative provision(s) under theEU VAT laws 238

13.28-4 Rule 4(a) - Comparative rule under the UK VAT laws 238

13.29 Services requiring service receiver�s or its agent�s presence[Rule 4(b)] 239

13.29-1 Illustrative list of services covered under rule 4(b) 240

13.29-2 Rule 4(b) - Relevant comparative provision(s) under theEU VAT laws 240

13.29-3 Rule 4(b) - Comparative rule under the UK VAT laws 240

13.30 Some key ECJ decisions on performance based rule 241

13.31 Determination of place of provision of performance based servicesunder rule 4 - Case studies 242

13.31-1 General rule [Rule 4(a) & (b)] 242

13.31-2 Exception to the general rule [Proviso to rule 4(a)] 243




13.34 Meaning of �immovable property� 244

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I-31 CONTENTS

13.35 Services directly relating to immovable property 245

13.35-1 Illustrative list of services directly in relation toimmovable property 246

13.36 Service may be in relation to an existing or a future immovableproperty 247

13.37 Services specifically covered under rule 5 247

13.38 Determination of place of provision of services under rule 5 -Case study 247



13.40-1 Meaning of �land� 248

13.40-2 Services directly related to land or property 249

13.40-3 Land related services 249

13.41 Some key ECJ decisions on immovable property related services 250




13.44 Services by way of admission to an event or ancillary to admissionor by way of organization of an event 253

13.44-1 Services by way of admission to an event 253

13.44-2 Services ancillary to admission to an event 253

13.44-3 Services by way of organization of an event 254

13.45 Determination of place of provision of services under rule 6 -Case Study 254



13.47-1 Anciliary services 256

13.48 Some key European court decisions on the concept of events/services relating to events 256



13.51 Service provided at multiple locations, including a location in thetaxable territory 258

13.52 Place of provision of service - Location in the taxable territorywhere greatest proportion of the service is provided 259




13.56 Service provider and service recipient located in taxable territory 261

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CONTENTS I-32

13.57 Place of provision of service (rule 8) - Location of service recipient 261




13.61 Services provided by banking company, or financial institution, ornon-banking financial company, to account holders 263

13.61-1 Meaning of a banking company, financial institution andnon-banking financial company 263

13.61-2 Meaning of the account holder 264

13.61-3 Rule 9(a) - Relevant comparative provision(s) under theEU VAT laws 265

13.61-4 Rule 9(a) - Relevant comparative provision(s) under theUK VAT laws 265

13.62 Online information and database access or retrieval services 266

13.62-1 Meaning of data 267

13.62-2 Meaning of information 267

13.62-3 Meaning of electronic form 267

13.62-4 Meaning of computer network 268

13.62-5 Scope of online information and database access orretrieval services 268

13.62-6 Rule 9(b) - Relevant comparative provision(s) under theEU VAT laws 269

13.62-7 Rule 9(b) - Relevant comparative provision(s) under theUK VAT laws 269

13.63 Intermediary services 271

13.63-1 Meaning of intermediary 271

13.63-2 Rule 9(c) - Relevant comparative provision(s) under theEU VAT laws 272

13.63-3 Rule 9(c) - Relevant comparative provision(s) under theUK VAT laws 272

13.64 Service consisting of hiring of means of transport upto a periodof one month 273

13.64-1 Meaning of hiring 273

13.64-2 Meaning of means of transport 274

13.64-3 Upto a period of one month 274

13.64-4 Rule 9(d) - Relevant comparative provision(s) under theEU VAT laws 275

13.64-5 Rule 9(d) - Relevant comparative provision(s) under theUK VAT laws 276

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I-33 CONTENTS

13.65 Place of provision of specified services (rule 9) - Location of serviceprovider 277




13.69 Meaning of goods 278

13.70 Means of transport 278

13.70-1 Exception - Transportation of goods by mail or courier 278

13.71 Place of provision of service - Destination of goods 279

13.71-1 Determination of place of provision of services relatingto transport of goods under rule 10 - Case Study 279

13.72 Exception - Transportation of goods by goods transport agency 279

13.72-1 Meaning of goods transport agency 280

13.72-2 Person liable to pay service tax 280

13.72-3 Place of provision of service - Location of person liableto pay tax 280

13.72-4 Determination of place of provision of services of goodstransport agency under rule 10 (proviso) - Case Study 281

13.73 Rule 10 - Relevant comparative provision(s) under the EU VATlaws 281

13.73-1 B2B supply of goods transport services 281

13.73-2 B2C supply of goods transport services 281

13.73-3 Meaning of intra-community transport of goods 282

13.73-4 Meaning of place of departure 282


13.74-1 Meaning of freight transport 282

13.74-2 Meaning of freight 282

13.74-3 Determination of place of supply of services relating totransport of goods 282



13.77 Transportation of passengers 283

13.78 Means of transport 284

13.79 Place of provision of service - Place where the passenger embarkson the conveyance for a continuous journey 284

13.80 Determination of place of provision of passenger transport servicesunder rule 11 - Case Studies 285

13.80-1 Continuous journey 285

13.80-2 Non-continuous journey 285

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CONTENTS I-34

13.81 Rule 11- Relevant comparative provision(s) under the EU VAT laws 286

13.82 Rule 11- Relevant comparative provision(s) under the UK VAT laws 286

13.82-1 Meaning of passenger transport 286

13.82-2 Exclusions 286

13.82-3 Inclusions �incidental services� 286

13.82-4 Place of supply of passenger transport service 287



13.85 Services provided on board a conveyance 287

13.85-1 Services provided on board a conveyance must beseparately charged 288

13.86 Place of provision of service - First scheduled point of departure ofthe conveyance for the journey 288

13.87 Determination of place of provision of services provided on-boarda conveyance - Case Study 288



Annex 13.1 : Location of service provider/service receiver-Flow diagram 290

Annex 13.2 : Meaning of fixed extablishment 291

Annex 13.3 : Indicative list of the electronically supplied servicesreferred to in Article 58 and point (k) of the firstparagraph of Article 59 292

Annex 13.4 : Illustrations on passenger transport services 294

PART B

OLD LAW v. NEW LAW

14

POSITIVE LIST vs. NEGATIVE LIST -A COMPARATIVE STUDY


14.2 Key legislative provisions for export and import of services underold regime vis-a-vis new regime 303

14.2-1 The Finance Act, 1994 [Section 65 �Definition�] 303

14.2-2 Export of Service Rules, 2005 [�Export Rules�] 303

14.2-3 Taxation of Services (Provided from outside India andreceived in India) Rules, 2006 [�Import Rules�] 304

14.2-4 Place of Provision of Services Rules, 2012 [PPS Rules] 305

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I-35 CONTENTS

14.3 Comparison of old law with new law for taxable services notifiedunder old law 306

14.3-1 Advertising agency�s services 306

14.3-2 Airport services 307

14.3-3 Air travel agent�s services 311

14.3-4 Architect�s services 313

14.3-5 Asset management services 313

14.3-6 Auction services 314

14.3-7 Automated Teller Machine (ATM) operations,maintenance or management services 315

14.3-8 Banking and other financial services 316

14.3-9 Beauty treatment services 319

14.3-10 Broadcasting services 319

14.3-11 Business auxiliary services 320

14.3-12 Business exhibition services 324

14.3-13 Business support services 324

14.3-14 Cable services 326

14.3-15 Cargo handling services 327

14.3-16 Chartered accountant�s services 328

14.3-17 Cleaning services 329

14.3-18 Clearing and forwarding agent�s services 330

14.3-19 Club or association services 331

14.3-20 Commercial or industrial construction services 332

14.3-21 Commercial training or coaching services 334

14.3-22 Commercial use or exploitation of event services 337

14.3-23 Commodity exchange services 337

14.3-24 Company secretary�s services 338

14.3-25 Construction of residential complex services 339

14.3-26 Consulting engineer�s services 340

14.3-27 Convention services 341

14.3-28 Copyright services 342

14.3-29 Cosmetic and plastic surgery services 343

14.3-30 Cost accountant�s services 344

14.3-31 Courier services 345

14.3-32 Credit card, debit card, charge card or other paymentcard services 346

14.3-33 Credit rating agency�s services 347

14.3-34 Custom house agent�s services 347

14.3-35 Design services 348

PAGE

CONTENTS I-36

14.3-36 Development and supply of content service for use incertain services 349

14.3-37 Dredging services 349

14.3-38 Dry cleaning services 350

14.3-39 Electricity exchange�s service 351

14.3-40 Erection, commissioning or installation services 352

14.3-41 Event management services 353

14.3-42 Fashion designing services 354

14.3-43 Foreign exchange broker�s services 355

14.3-44 Forward contract services 356

14.3-45 Franchise services 357

14.3-46 General insurance service 358

14.3-47 Health and fitness centre service 361

14.3-48 Health check-up and treatment services/clinicalestablishment services 362

14.3-49 Hotel/short-term accommodation services 363

14.3-50 Information technology software service 364

14.3-51 Insurance auxiliary services (General insurance) 365

14.3-52 Insurance auxiliary services (Life insurance) 367

14.3-53 Intellectual property services 368

14.3-54 Interior decorator�s services 369

14.3-55 Internet cafe services 370

14.3-56 Internet telecommunication services 371

14.3-57 Legal consultancy services 372

14.3-58 Life insurance services 373

14.3-59 Mailing list compilation and mailing services 374

14.3-60 Management, maintenance or repairs services 375

14.3-61 Management of investment under ULIP services 377

14.3-62 Management or business consultancy services 378

14.3-63 Mandap keeper�s services 378

14.3-64 Manpower recruitment and supply agency�s services 379

14.3-65 Market research agency�s services 380

14.3-66 Medical records maintenance services 381

14.3-67 Mining of mineral, oil or gas service 382

14.3-68 Motor-vehicle repair related services 383

14.3-69 Online information and database access or retrieval services 384

14.3-70 Opinion poll services 385

14.3-71 Other port (minor port) services 385


PAGE

I-37 CONTENTS

14.3-73 Packaging services 391

14.3-74 Pandal or shamiana contractor�s services 391

14.3-75 Photography services 393

14.3-76 Port (major port) services 393

14.3-77 Processing and clearing house services 397

14.3-78 Programme producer�s services 398

14.3-79 Promotion, marketing or organizing of games of chanceservices 399

14.3-80 Promotion of brand of goods, services, events, businessentity etc. 401

14.3-81 Provision of preferential location or external or internaldevelopment of complex services 402

14.3-82 Public relations management services 403

14.3-83 Rail travel agent�s services 404

14.3-84 Real estate agent�s services 405

14.3-85 Recovery agent�s services 405

14.3-86 Registrar to an issue�s services 406

14.3-87 Rent-a- cab operator�s services 407

14.3-88 Renting of immovable property services 408


14.3-90 Sale of space or time for advertisement services 411

14.3-91 Scientific or technical consultancy services 412

14.3-92 Security/detective agency�s services 413

14.3-93 Share transfer agent�s services 413

14.3-94 Ship management services 414

14.3-95 Site formation and clearance, excavation, earth movingand demolition services 416

14.3-96 Sound recording service 417

14.3-97 Sponsorship services 418

14.3-98 Steamer agent�s services 420

14.3-99 Stock broker�s services 421

14.3-100 Stock exchange services 422

14.3-101 Storage and warehousing services 423

14.3-102 Supply of tangible goods services 425

14.3-103 Survey and exploration of mineral, oil or gas service 426

14.3-104 Survey and map making services 427

14.3-105 Technical inspection and certification services 428

14.3-106 Technical testing and analysis services 429

14.3-107 Telecommunication services 431

PAGE

CONTENTS I-38

14.3-108 Tour operator�s services 433

14.3-109 Transport of costal goods and goods transported throughnational waterways and inland water services 435

14.3-110 Transport of goods by air services 437

14.3-111 Transport of goods by rail services 439

14.3-112 Transport of goods by road services 440

14.3-113 Transport of goods other than water through pipeline orother conduit service 444

14.3-114 Transport of passengers by air services 445

14.3-115 Transport of persons by cruise ship services 447

14.3-116 Travel agent�s services 448

14.3-117 Underwriter�s services 449

14.3-118 Video production agency�s services 450

14.3-119 Works contract services 451

Annex 14.1 : Export of Services Rules, 2005 454

Annex 14.2 : Taxation of Services (Provided from outside India andreceived in India) Rules, 2006 458

PART C

TAXABILITY OF SPECIFIC SERVICES

15

ADVERTISEMENTS SERVICESUNDER NEGATIVE LIST



15.3 Meaning of advertisement 463

15.4 Scope of the activities of selling of space or time slots foradvertisements covered under the negative list 464

15.5 Sale of space or time slots under various forms of advertising andtheir coverage under the negative list 464

15.5-1 Advertising through print media 464

15.5-2 Outdoor advertising 465

15.5-3 Broadcast advertising 465

15.5-4 Infomercials 465

15.5-5 Covert advertising 465

15.5-6 Surrogate advertising 466

15.5-7 Public service advertising 466

15.5-8 Celebrity endorsements 466

PAGE

I-39 CONTENTS

16

AGRICULTURAL SERVICES UNDER NEGATIVELIST AND SPECIFIC EXEMPTIONS



16.3 Scope of services relating to agriculture 468

16.4 Agricultural operations directly related to production ofagricultural produce 468

16.4-1 Meaning of relevant terms/expressions 468

16.5 Supply of farm labour 470

16.6 Processes carried out on agricultural farm 471

16.7 Renting of agro machinery or vacant land 471

16.7-1 Renting of agricultural machinery 471

16.7-2 Renting of vacant land with or without a structureincidental to its use 471

16.8 Loading, unloading, storage and warehousing services 471

16.8-1 Meaning of relevant terms/expressions 471

16.9 Agricultural extension services 473

16.9-1 Meaning of agricultural extension services 473

16.10 Services by Agricultural Produce Marketing Committee orCommission agents 473

16.10-1 Meaning of Agricultural Produce Marketing Committee orBoard 473

16.10-2 Services provided by a commission agent 474

16.11 Exemptions on services relating to agriculture or agriculturalproduce 474

16.11-1 Construction activities 474



16.11-4 General insurance services under specified schemes 475

16.11-5 Exemptions on intermediate production processes 476

17

BANKING, FINANCIAL AND INSURANCE SERVICESUNDER NEGATIVE LIST AND SPECIFIC EXEMPTIONS


17.2 Meaning of relevant terms 477

PAGE

CONTENTS I-40

17.2-1 Meaning of bank 478

17.2-2 Meaning of interest 479

17.2-3 Meaning of authorized dealer 479

17.3 Coverage under the negative list 480


17.3-2 Activity of extending loans or deposits where theconsideration is in the form of interest or discount 480

17.3-3 Services by way of sale or purchase of foreign currency 481

17.4 Specific exemptions 482

17.4-1 Exemptions under the Mega Exemption Notification 482

17.4-2 Abatement from taxable value on financial leasingtransactions 484

17.5 Place of provision of banking, financial or insurance services 485

17.5-1 Place of provision of services provided by a bankingcompany, or a financial institution, or a non-bankingfinancial company, to account holders 485

17.5-2 Place of provision of other banking financial servicesor insurance services 487

17.6 Valuation of banking, financial or insurance services 488



18

BETTING, GAMBLING OR LOTTERY SERVICESUNDER NEGATIVE LIST



18.3 Meaning and scope of betting or gambling 490

18.3-1 Legality of betting or gambling activities in India 491

18.4 Meaning of lottery 491

18.4-1 Legality of lottery in India 492

18.5 Ancillary services to betting, gambling or lottery are excluded fromthe negative list 492

18.5-1 Exemption to lottery distributor or selling agent 492

18.5-2 Composition scheme for services of promotion, marketing,organizing of lottery 493

PAGE

I-41 CONTENTS

18.6 Some key ECJ decisions on the EU VAT exemption on betting,gambling or lottery 494

18.6-1 Relevant Article(s) of the Sixth EU VAT Directive 494

18.6-2 Fischer v. Finanzamt Donaueschingen (Case C-283/95)[1998] All ER (D) 264 494

18.6-3 United Utilities v. HMRC (C-89/05) [ECJ.89105[2006] STC 1423] 495

18.6-4 Etat Belge v. Pierre Henfling, Raphael Davin and KoenraadTanghe (Case C-464/10) 496

Annex 18.1 : Scope of services relating to promoting, marketingor organizing of games of chance, including lotteryExplained under the erstwhile positive list regime 497

19

CATERING AND RESTAURANT SERVICESAS DECLARED SERVICES


19.2 Scope of catering service as a declared service 498

19.3 Meaning of catering 499

19.4 Specified goods 500

19.4-1 Meaning of food 500

19.4-2 Meaning of articles of human consumption 500

19.4-3 Meaning of drink 500

19.5 Place of provision of catering service as a declared service 501

19.6 Point of taxation of catering service as a declared service 501

19.7 Valuation catering service as a declared service 501


19.7-2 Framework of rule 2C 502



19.7-5 Meaning of total amount 502

19.7-6 Bar on availing CENVAT Credit on goods meant forhuman consumption 503

19.8 Reverse charge liability 503

19.9 General exemptions 504

19.10 Specific exemptions on catering services 504

19.10-1 Catering services to educational institutions 504

PAGE

CONTENTS I-42

19.10-2 Exemption to specified category of restaurants, eatingjoints and messes 504

19.10-3 30 per cent abatement on catering services rendered atspecified premises 505

20

CHARITABLE AND RELIGIOUS SERVICESEXEMPT FROM TAX


20.2 Scope of exemptions 506

20.3 Services in relation to charitable activities 506

20.3-1 Some key ECJ decisions on EU VAT exemption on servicesof organizations devoted to social well being 507

20.4 Services in relation to religious activities 508

21

CONSTRUCTION SERVICES AS DECLARED SERVICESAND SPECIFIC EXEMPTIONS


21.2 Constitutional validity 509

21.3 Construction activities - A declared service 510

21.4 Scope of the construction activities covered under the list ofdeclared services 511

21.5 Meaning of construction 511

21.5-1 Meaning of addition 511

21.5-2 Meaning of alteration 512

21.5-3 Meaning of replacement 512

21.5-4 Meaning of remodelling 512

21.6 Complex, building or Civil Structure 512

21.6-1 Meaning of complex 512

21.6-2 Meaning of building 513

21.6-3 Meaning of civil structure 513

21.7 Complex or building intended for sale 513

21.7-1 Authority competent to issue completion certificate 513

21.8 Possible arrangements in terms of which construction activitiesmay be undertaken 514

21.8-1 Tripartite Business Model 514

21.8-2 Redevelopment including slum rehabilitation projects 515

21.8-3 Investment model 515

PAGE

I-43 CONTENTS

21.8-4 Conversion Model 516

21.8-5 Build - Operate - Transfer (BOT) Projects 516

21.8-6 Joint Development Agreement Model 518

21.9 Place of provision of construction activities as a declared service 519

21.10 Point of taxation of construction activities as a declared service 519

21.11 Valuation of construction activities as a declared service 519




21.14-1 Specified services provided to the Government, localauthority or Governmental authority 520



21.14-4 Abatement on construction activities 522

Annex 21.1 : Clarifications on taxability of construction services underdifferent business models 523

Annex 21.2 : Departmental clarifications on taxability of revenuesharing arrangements 527

22

CREMATION AND FUNERAL SERVICESUNDER NEGATIVE LIST



22.3 Scope of cremation services covered under the negative list 530

22.4 Related/similar exemptions 530

22.4-1 Construction, maintenance etc. of electric crematorium 530

22.4-2 Slaughtering of animals 531

22.5 Experience under the UK VAT 531

Annex 22.1 : Clarification on scope of exemption on cremation servicesunder the UK VAT 532

23

EDUCATION SERVICES UNDER NEGATIVELIST AND SPECIFIC EXEMPTIONS


PAGE

CONTENTS I-44


23.3 Pre-school education or education upto higher secondary schoolor equivalent 540

23.3-1 Meaning of pre-school education 540

23.3-2 Meaning of education upto higher secondary school orequivalent 541

23.4 Education as a part of curriculum for obtaining qualificationrecognized by law 541

23.4-1 Scope the term qualification recognized by law 541

23.5 Vocational education course 542

23.5-1 Vocational training institute/industrial training centreaffiliated to NCVT/SCVT 542

23.5-2 Modular Employable Skill Course approved by NCVT 542

23.5-3 Courses run by institutes affiliated to NSDC 543

23.6 Scope of the education services covered under the negative list 543

23.6-1 Services provided by boarding schools 544

23.6-2 Services provided to educational institutions 544

23.6-3 Private tuitions 544

23.6-4 Courses leading to dual qualification only one of whichis recognized by Indian law 544

23.6-5 Placement services provided to educational institutions 545

23.6-6 Entrance tests for admission to colleges 545

23.6-7 Service by educational institutes for campus recruitments 545

23.7 Exemptions under Mega Exemption Notification on servicesancillary to education 545

Annex 23.1 : Departmental clarification on Leviability of Service Taxon Flying Training School & Aircraft MaintenanceEngineering Institutes issued under the erstwhilepositive list regime 547

Annex 23.2 : Departmental clarification on Levy of service tax oneducational institutions issued under the erstwhilepositive list regime 549

Annex 23.3 : Vocational education/training/skill development course(VEC) offered by government institutions or localauthorities covered under negative list 553

Annex 23.4 : List of Trades designated under the Apprentices Act, 1961 554

Annex 23.5 : List of Approved Modular Employable skill (MES) courses 561

PAGE

I-45 CONTENTS

24

ELECTRICITY TRANSMISSION OR DISTRIBUTIONSERVICES UNDER NEGATIVE LIST



24.3 Meaning of electricity 571

24.4 Meaning of transmission of electricity 572

24.5 Meaning of distribution of electricity 572

24.6 Meaning of electricity transmission or distribution utility 572

24.6-1 Central Electricity Authority 572

24.6-2 State Electricity Board 573

24.6-3 Central Transmission Utility 573

24.6-4 State Transmission Utility 573

24.6-5 Transmission licensee 573

24.6-6 Distribution licensee 573

24.7 Scope of the specified services of transmission or distribution ofelectricity 574

24.8 Position under the erstwhile service tax regime 574

Annex 24.1 : Exemption to Transmission of electricity under theerstwhile positive list regime 576

Annex 24.2 : Earlier departmental clarification on Electricity meterinstalled in consumers� premises and hire chargescollected, whether covered under exemption fortransmission and distribution of electricity 577

Annex 24.3 : Exemption from service tax for distribution of electricityunder the erstwhile positive list regime 578

25

ENTERTAINMENT SERVICES UNDERNEGATIVE LIST



25.3 Meaning of entertainment events 579

25.4 Meaning of amusement facilities 580

25.5 Scope of activities by way admission to entertainment events oramusement facilities covered under the negative list 580

25.6 Place of provision of event related services 580

PAGE

CONTENTS I-46

26

FOREIGN DIPLOMATIC MISSIONS� SERVICESUNDER NEGATIVE LIST



26.3 Scope of the services by foreign diplomatic missions located inIndia covered under the negative list 582

26.4 List of foreign diplomatic missions located in India 583

26.5 Exemption on services to foreign diplomatic missions 583

Annex 26.1 : List of the foreign diplomatic missions located in India 584

27

GOODS TRANSPORT SERVICES UNDER NEGATIVELIST AND SPECIFIC EXEMPTIONS



27.3 Scope of goods transport services 589

27.4 Transportation of goods 590

27.4-1 Meaning of transport vehicle 590

27.5 Modes of transportation 590

27.5-1 Goods transport agency 590

27.5-2 Courier agency 591

27.5-3 Transportation of goods by an aircraft or vessel from aplace outside India upto the customs station of clearance 592

27.5-4 Transportation of goods by inland waterways 593

27.5-5 Coverage of goods transport services under the negativelist 594

27.5-6 Services provided by agents for transport of goods byinland waterways 595

27.6 Reverse charge liability on transportation of goods by goodstransport agency 595




27.7-3 Specified services of giving means of transport on hire 597

27.7-4 Abatement on transport of goods services 597

27.8 Place of provision of goods transportation services 597

PAGE

I-47 CONTENTS

28

GOVERNMENT SERVICES UNDER NEGATIVELIST AND SPECIFIC EXEMPTIONS



28.3 Scope of the services by Government and local authorities coveredunder the negative list 598

28.4 What is �Government�? 599

28.4-1 Definition of Government under the General ClausesAct, 1897 599

28.5 What is �local authority�? 600

28.6 Exclusions for services by government or local authority fromnegative list 601

28.6-1 Specified services by the department of posts 601

28.6-2 Services in relation to an aircraft or a vessel rendered byGovernment or local authority 602

28.6-3 Transport of goods or passengers by Government orlocal authority 603

28.6-4 Support services provided to business entities byGovernment or local authority 603

28.6-5 Meaning of �to the extent not covered elsewhere� 604

28.7 Exemption on services provided to Government or local authorityor a governmental authority 605

28.8 Exemption on services provided by governmental authority 605

29

HIRE PURCHASE OR SALE BY INSTALMENT RELATEDSERVICES AS DECLARED SERVICES



29.3 Scope of hire purchase or sale by instalment related services as adeclared service 607

29.4 Delivery of goods 608

29.4-1 Meaning of delivery 608

29.4-2 Meaning of goods 608

29.5 Hire purchase or any system of payment by instalment 609

29.5-1 Meaning of hire purchase 609

PAGE

CONTENTS I-48

29.5-2 Types of hire purchase arrangements 611

29.5-3 Any other system of payment by instalment 613

29.5-4 Comparative analysis of hire purchase, finance lease andsale by instalment 613

29.6 Scope of the taxable transaction 614

29.7 Place of provision in relation to delivery of goods on hire purchaseand sale by instalment related services as a declared service 615

29.8 Point of taxation in relation to hire purchase and sale byinstalment related services as a declared service 615

29.9 Valuation of activities in relation to hire purchase and sale byinstalment related services as a declared service 615


29.11 Relevant services covered under the negative list 616



Annex 29.1 : Definition of financial leasing under the erstwhile positivelist regime 617

Annex 29.2 : Clarification on scope of financial leasing services underthe erstwhile positive list regime 618

30

INFORMATION TECHNOLOGY SOFTWARESERVICES AS DECLARED SERVICES



30.3 Scope of IT software service as a declared service 620

30.4 Meaning of IT software 621

30.4-1 Essential features of �IT software� 621

30.5 Meaning of development of IT software 621

30.6 Meaning of design of IT software 622

30.7 Meaning of programming of IT software 622

30.8 Meaning of customization of IT software 622

30.9 Meaning of adaptation of IT software 622

30.10 Meaning of upgradation of IT software 622

30.11 Meaning of enhancement of IT software 623

30.12 Meaning of implementation of IT software 623

30.13 Taxability of packaged/canned software 623

PAGE

I-49 CONTENTS

30.14 Classification of IT software transactions under the EU VAT laws 623

30.15 Place of provision of IT software service as a declared service 624

30.16 Point of taxation of IT software service as a declared service 624

30.17 Valuation of IT software service as a declared service 624



30.20 Exemption to the extent of R&D cess paid 625

Annex 30.1 : Definition of information technology software service(prior to 1-7-2012) 626

31

INTELLECTUAL PROPERTY RIGHT SERVICESAS DECLARED SERVICES


31.2 Scope of intellectual property service as a declared service 627

31.3 Meaning of intellectual property 628

31.3-1 Meaning of copyright 629

31.3-2 Types of copyrights 630

31.3-3 Meaning of patent 631

31.3-4 Meaning of trademark 631

31.3-5 Meaning of design 632

31.3-6 Other intellectual properties 632

31.4 Temporary transfer or permitting the use or enjoyment 632

31.5 Whether or not the intellectual property right is registered underIndian laws is immaterial 633

31.6 Place of provision of intellectual property service as a declaredservice 633

31.7 Point of taxation of intellectual property service as a declaredservice 633

31.8 Valuation of intellectual property service as a declared service 633



31.11 Specific exemptions on intellectual property services 634

31.11-1 Exemption on specified copyright services 634

31.11-2 Exemption to the extent of R&D cess paid 635

PAGE

CONTENTS I-50

32

MANUFACTURE OR JOB WORK ACTIVITIES UNDERNEGATIVE LIST & SPECIFIC EXEMPTIONS



32.3 What is a �process�? 636

32.4 Meaning of manufacture 637

32.4-1 Judicial precedents - Manufacture 637

32.4-2 Incidental or ancillary process 639

32.4-3 Process specified in relation to any goods in Section orChapter Notes 639

32.4-4 Select activities in relation to goods specified underThird Schedule of CETA 639

32.5 Meaning of production 639

32.6 Meaning of process amounting to manufacture or production ofgoods 640

32.6-1 Central or state excise duty must be leviable on theprocess 640

32.6-2 Processes not amounting to manufacture or productionof goods liable to service tax 640

32.6-3 Manufacturing activity carried out by the job worker 641

32.7 Exemptions on intermediate production processes 641

Annex 32.1 : Central Excise Tariff Act, 1985 - Third Schedule 643

Annex 32.2 : Processes liable to central excise - Section 3 of CentralExcise Act, 1944 649

33

MEDICAL AND HEALTH CARE SERVICES -SPECIFIC EXEMPTIONS


33.2 Exemptions on medical and health care services 651

33.3 Meaning of health care services 651

33.3-1 Meaning of recognized system of medicine 652

33.3-2 Meaning of clinical establishment 652

33.3-3 Meaning of authorized medical practitioner 652

33.3-4 Meaning of paramedics 652

33.3-5 Some key ECJ decisions on EU VAT exemption onmedical/health care services 653

PAGE

I-51 CONTENTS

34

PASSENGER TRANSPORT SERVICES UNDERNEGATIVE LIST & SPECIFIC EXEMPTIONS



34.3 Scope of passenger transport services 659

34.4 Transportation of passenger 659

34.5 Modes of transportation 659

34.5-1 Stage carriage 660

34.5-2 Railways 660

34.5-3 Metro, monorail or tramway 660

34.5-4 Inland waterways 661

34.5-5 Public transport in vessel 662

34.5-6 Metered cabs, radio taxis or auto rickshaws 663


34.6-1 Passenger transportation in specified locations orthrough contract carriage 663

34.6-2 Transportation of passengers by railways 664

34.6-3 Services by way of giving on hire means of transport 664

34.6-4 Motor vehicle parking services 664

34.6-5 Abatement on passenger transport services 665


34.7 Place of provision of passenger transportation services 666

34.8 Valuation of passenger transport services 666



34.9 Composition scheme on services provided by an air travel agent 667

Annex 34.1 : Service tax on transportation of passengers by air -Clarification 668

35

PASSIVE ACTIONS AS DECLARED SERVICES


35.2 Scope of passive action as a declared service 670

35.2-1 Non-compete clauses are included 670

35.3 Place of provision of passive action as a declared service 670

PAGE

CONTENTS I-52

35.4 Point of taxation of passive action as a declared service 671

35.5 Valuation of passive action as a declared service 671


35.7 Relevant comparative provision(s) under the EU VAT Laws 671

35.7-1 Rule with respect to place of supply for passive actionsunder the UK VAT law 671

35.7-2 Relevant ECJ case law 671

Annex 35.1 : VATPOSS13100 - Other services to non-EU customers(B2C) : Law 673

36

RBI SERVICES UNDER NEGATIVE LIST



36.3 Scope of the services by Reserve Bank of India covered under thenegative list 674

36.4 What is �Reserve Bank of India� 674

36.5 Principal activities of RBI 675

36.5-1 Formulation and execution of monetary policy 675

36.5-2 Issuer of currency 676

36.5-3 Banker and debt manager to government 676

36.5-4 Banker to banks 676

36.5-5 Regulator of the banking system 677

36.5-6 Manager of foreign exchange 677

36.5-7 Regulator and supervisor of the payment and settlementsystems 677

36.5-8 Developmental role 677

36.5-9 Miscellaneous functions 678

36.6 Businesses which the RBI may/may not transact 678

Annex 36.1 : Business which the RBI may transact 679

Annex 36.2 : Section 19 of the Reserve Bank of India Act, 1934 687

37

RENTING OF GOODS AS DECLARED SERVICE


37.2 Scope of hiring, leasing, licensing of goods as a declared service 688

PAGE

I-53 CONTENTS

37.3 Transfer of goods 689

37.3-1 Meaning of transfer 689

37.3-2 Meaning of goods 689

37.4 Mode of transfer of goods 689

37.4-1 Meaning of hiring 690

37.4-2 Meaning of leasing 690

37.4-3 Meaning of licensing 690

37.5 Transfer of goods without transfer of right to use such goods 690

37.6 Judicial precedents - �Transfer of effective control and possession� 692

37.7 Place of provision of hiring, leasing, licensing of goods withouttransfer of right to use goods as a declared service 693

37.8 Point of taxation of hiring, leasing, licensing of goods withouttransfer of right to use goods as a declared service 693

37.9 Valuation of hiring, leasing, licensing of goods without transferof right to use goods as a declared service 694


37.11 Hiring, leasing, licensing of goods covered under the negative list 694


Annex 37.1 : Illustrations on transfer of right to use goods 695

Annex 37.2 : Departmental clarification on supply of tangible goodsservice under the erstwhile positive list regime 696

Annex 37.3 : Service Tax on chartering of aircrafts - Departmentalclarification under the erstwhile positive list regime 697

38

RENTING OF IMMOVABLE PROPERTY SERVICES -AS DECLARED SERVICES; COVERAGE UNDER

NEGATIVE LIST & SPECIFIC EXEMPTIONS



38.3 Renting of immovable property - As declared service 700

38.4 Scope of renting of immovable property as a declared service 700

38.5 Meaning of renting 701

38.5-1 Whether or not control and possession of immovableproperty is transferred is immaterial 701

38.5-2 Renting includes letting, leasing, licensing or other similararrangements 701

38.5-3 Duration of renting is immaterial 703

PAGE

CONTENTS I-54

38.6 Meaning of immovable property 703

38.6-1 Judicial precedents - �immovable property� 704

38.7 Place of provision of renting of immovable property as a declaredservice 707

38.8 Point of taxation of renting of immovable property as a declaredservice 708

38.9 Valuation of renting of immovable property as a declared service 708


38.11 Specific activities of renting of immovable property coveredunder the negative list 709

38.12 Renting of residential dwelling for use as residence 709


38.12-2 Meaning of residential dwelling 709

38.12-3 Accommodations not qualifying as residential dwelling 710

38.12-4 Renting of residential dwelling must be for use as residence 711

38.12-5 Taxability of bundled services involving renting ofresidential dwelling 711

38.12-6 Coverage of activity renting of residential dwellingunder negative list under various scenarios 712

38.13 Other relevant services covered under the negative list of services 713



38.15-1 Renting of immovable property for religious purposes 713

38.15-2 Renting of hotel, inn, guest house etc. with room tariffupto INR 1000 713

38.15-3 Exemption to the extent the gross amount chargedrepresents property tax 714

38.15-4 Abatement on renting of hotel, inns, guest houses etc. 714

Annex 38.1 : Departmental clarification on scope of renting ofimmovable property under the erstwhile positivelist regime 715

39

TOLL ROAD SERVICES UNDER NEGATIVE LIST



39.3 Services related to access to road or bridge on payment on toll 716

39.3-1 Meaning of road 716

PAGE

I-55 CONTENTS

39.3-2 Meaning of bridge 717

39.3-3 Meaning of toll 717

39.4 Difference between tax, toll, cess, fee and duty 717

39.5 Incidental services by toll collecting agencies 718

39.6 Some key ECJ decisions 718

Annex 39.1 : Departmental clarification issued under the erstwhilepositive list regime regarding levy of service tax on tollfee paid by user for using roads 720

40

TRADING OF GOODS UNDERNEGATIVE LIST



40.3 Meaning of trading 721

40.4 Meaning of goods 721

40.4-1 Meaning of securities 722

40.4-2 Meaning of actionable claim 722

40.4-3 Meaning of money 723

40.5 Exclusion towards sale of goods under definition of �service� 723

40.6 Trading does not include commission agent�s service 724

40.7 Commodity trading transactions 724

41

WORKS CONTRACT SERVICES AS DECLAREDSERVICES & SPECIFIC EXEMPTIONS


41.2 Scope of works contract service as a declared service 725

41.3 Meaning of works contract 726

41.3-1 Meaning of construction 726

41.3-2 Meaning of erection 726

41.3-3 Meaning of commissioning 726

41.3-4 Meaning of installation 726

41.3-5 Meaning of completion 727

41.3-6 Meaning of fitting out 727

41.3-7 Meaning of repair 727

PAGE

CONTENTS I-56

41.3-8 Meaning of maintenance 727

41.3-9 Meaning of renovation 728

41.3-10 Meaning of alteration 728

41.3-11 Meaning of movable property 728

41.3-12 Meaning of immovable property 729

41.3-13 Goods portion of the works contract must be leviableto tax as sale of goods 729

41.4 Service element in execution of works contract 729

41.4-1 Coverage of works contract 729

41.4-2 Pure labour contracts are excluded 730

41.4-3 Activity done for self is not works contract 730

41.5 Distinction between contract of sale and works contract 730

41.6 Place of provision in relation to works contract service as adeclared service 731

41.7 Point of taxation in relation to works contract service as adeclared service 731

41.8 Valuation of service element under works contract services as adeclared service 731


41.8-2 Framework of Rule 2A 733

41.8-3 Actual deduction method [Rule 2A(i)] 733

41.8-4 Abatement/deemed deduction method [Rule 2A(ii)] 735

41.8-5 Bar on availing CENVAT Credit on goods 736


41.9-1 Reverse charge liability on works contract services 736

41.9-2 Reverse charge liability on services rendered by serviceproviders located outside the taxable territory 736



41.11-1 Specified services provided to the Government, localauthority or Governmental authority 737



41.11-4 Abatement on construction activities 739

41.11-5 Exemption to sub-contractors 739

PAGE

I-57 CONTENTS

PART D

CENVAT CREDIT SCHEME FORSERVICE PROVIDERS

42

SCHEME OF CENVAT CREDIT FORSERVICE PROVIDERS


42.2 Historical background 743

42.3 Eligibility of CENVAT credit to service providers [Rule 3] 744

42.3-1 Specific duties and taxes available as CENVAT credit toservice providers 744

42.3-2 Meaning of provider of taxable service 745

42.3-3 Meaning of input 746

42.3-4 Meaning of capital goods 746

42.3-5 Meaning of input service 747

42.3-6 Date and place of receipt inputs/capital goods andquantum of CENVAT credit 749

42.3-7 Utilization of CENVAT credit 749

42.3-8 Removal of inputs or capital goods as such 750

42.3-9 Removal of inputs or capital goods after being used 750

42.3-10 CENVAT credit, if the value is written off in the booksof account 751

42.4 Conditions for claiming CENVAT credit [Rule 4] 751

42.4-1 CENVAT credit on inputs 751

42.4-2 CENVAT credit on capital goods 752

42.4-3 CENVAT credit on input services 753

42.5 Refund of CENVAT credit [Rule 5] 754

42.5-1 Meaning of Export service 756

42.5-2 Safeguards, conditions and limitations for claiming refund 756

42.5-3 Procedure for filing the refund claim 757

42.5-4 Documents to be enclosed with the refund application 758

42.6 Obligation of the provider of output service [Rule 6] 758

42.6-1 Meaning of exempted service 758

42.6-2 No CENVAT credit on inputs, input services and capitalgoods used exclusively for exempt service 759

42.6-3 CENVAT credit eligibility to provider of taxable andexempt services 759

PAGE

CONTENTS I-58

42.6-4 Options where separate accounts in terms of rule 6(2) arenot maintained 759

42.6-5 Conditions common to options available under Rule 6(3) 760

42.6-6 Provisional payment of duty [Rule 6(3A)] 760

42.6-7 CENVAT credit eligibility for banking and other financialservices 764

42.6-8 Meaning of value 764

42.6-9 Rule 6 restrictions not applicable to exported services and servicesprovided to SEZ without payment of service tax 764

42.7 Input credit distribution [Rules 7 & 7A] 764

42.7-1 Input credit distribution - The concept 764

42.7-2 Meaning of input credit distributor 765

42.7-3 Main constituents of the process of input servicedistribution 765

42.7-4 Manner of distribution of credit on input services byinput service distributor 765

42.8 CENVAT credit restrictions for specified category of services 766

42.9 Documents and accounts [Rule 9] 768

42.9-1 Documents necessary for claiming CENVAT credit 768

42.9-2 Credit document must contain prescribed particulars 769

42.9-3 CENVAT credit records to be maintained by serviceprovider 769

42.9-4 Submission of CENVAT credit returns 770

42.10 Transfer of CENVAT credit [Rule10] 770

42.11 Transitional provisions [Rule 11] 771

42.12 Recovery of CENVAT Credit wrongly utilized [Rule 14] 771

42.13 Confiscation and penalty [Rule 15] 772

42.14 Residuary penalty [Rule 15A] 772

42.15 Cenvat credit - Illustrations 772

42.16 Problems on Cenvat credit 772B

42.17 Case studies on Cenvat credit scheme 772G

Annex 42.1 : Rule 3(4) of the Cenvat Credit Rules, 2004 - Cenvat credit -Payment of arrears from Cenvat credit earned at a laterdate 773

Annex 42.2 : Procedure, safeguards, conditions and limitations forclaiming refund under rule 5 of CENVAT CreditRules, 2004 774

PAGE

I-59 CONTENTS

PART E

EXPORTERS’ INCENTIVES

43

INCENTIVES TO EXPORTER OF GOODS


43.2 Types of service tax incentives to exporter of goods 781

43.3 Service tax exemption to specified services received by exporterof goods 781

43.3-1 Meaning of goods transport agency 782

43.3-2 Meaning of goods carriage 783

43.3-3 Meaning of container freight station 783

43.3-4 Meaning of inland container depot 783

43.3-5 Distinction between ICD and CFS 783

43.3-6 Meaning of place of removal 784

43.3-7 Conditions/obligations for claiming service tax exemptionon specified services by goods transport agency 784

43.4 Exemption to specified services provided by overseas commissionagents 785

43.4-1 Conditions/obligations for claiming service tax exemptionon specified services by commission agent located outsideIndia 786

43.5 Rebate of service tax to exporter of goods 787

43.5-1 Specified services eligible for rebate 787

43.5-2 Amount of rebate claim 788

43.5-3 Procedure of rebate claim 788

43.5-4 Rebate claim to be denied where export proceeds notrealized within statutory timeline 791

43.6 Refund of CENVAT credit [Rule 5] 791

43.6-1 Safeguards, conditions and limitations for claimingrefund 793



PAGE

CONTENTS I-60

44

INCENTIVES TO EXPORTER OF SERVICES


44.2 Refund under rule 5 of the CENVAT Credit Rules, 2004 795

44.2-1 Meaning of export service 797

44.2-2 Safeguards, conditions and limitations for claimingrefund 798



44.3 Rebate of excise duty and service tax on inputs and input services 800

44.3-1 Key features of rebate scheme for exporter of services 800

44.3-2 Coverage of duties of excise 800

44.3-3 Coverage of service tax and cesses 801

44.3-4 Conditions for services to qualify as exports 801

44.3-5 Key conditions for claiming rebate of duty or service taxand cess 801

44.3-6 Procedure for claiming rebate 802

44.3-7 Rebate claim to be denied on breach of materialconditions 802

45

INCENTIVES TO SEZ DEVELOPERS AND UNITS


45.2 Service tax incentives available under Notification 40/2012-ST,dated 20-6-2012 803

45.3 Upfront exemption services received by SEZ unit/Developerof SEZ wholly consumed within the SEZ and used for authorizedoperations 804

45.3-1 Meaning of the term �wholly consumed� 804

45.3-2 Conditions for claiming outright exemption on serviceswholly consumed within SEZ for authorized operations 805

45.4 Exemption by way of refund to SEZ units/developers 806

45.4-1 Conditions for claiming refund by SEZ developers/units 807

45.4-2 Procedure for claiming benefit under NotificationNo. 40/2012-ST dated 20-6-2012 807

45.4-3 Documents to be enclosed along-with refund claimapplication 808

45.4-4 Recovery of refunds erroneously granted 808

PAGE

I-61 CONTENTS

PART F

SERVICE TAX PROCEDURES

46

REGISTRATION UNDER SERVICE TAX



46.3 Persons liable to obtain service tax registration 812

46.3-1 Person liable to pay service tax [Section 69(1)] 812

46.3-2 Registration by such other persons as notified by theCentral Government [Section 69(2)] 815

46.3-3 Registration requirement in case of 100% exporter ofservices 815

46.4 Types of registration 816

46.5 Procedure for registration under service tax 816

46.5-1 Form of application and methodology 816

46.5-2 Time limit for making application for registration 817

46.6 Time limit for grant of registration 817

46.7 Amendment in service tax registration 818

46.8 Cancellation/surrender of service tax registration 818

46.9 Penal provisions for non-compliance to registration requirement 818

Annex 46.1 : Procedural issues in service tax 819

Annex 46.2 : Harmonisation of Service Tax and Central ExciseRegistration 828

Annex 46.3 : Draft common format for registration under CentralExcise and Service Tax 830

Annex 46.4 : Documents required to be submitted along with the ST-1application for the purpose of registration 832

Annex 46.5 : Documents for address proof 834

Annex 46.6 : Salient features of registration procedure 835

Annex 46.7 : New procedure and documents required in respect ofcentralised registrations 837

Annex 46.8 : Procedure for surrendering registration 845

PAGE

CONTENTS I-62

47

INVOICING REQUIREMENTS FORSERVICE PROVIDERS


47.2 Invoicing requirements for service providers - Generally 847

47.3 Invoicing requirements for banking companies/financialinstitutions/non-banking financial company 849

47.4 Invoicing requirements in case of continuous supply of services 850

47.4-1 Meaning of continuous supply of service 850

47.5 Requirements for goods transport agency 851

47.5-1 Requirement to issue consignment note 851

47.6 Invoicing requirements for passenger transport service providers 851

47.7 Invoicing requirements for input service distributor 852

Annex 47.1 : Departmental clarifications on issuance of invoices, bills,challan, consignment note and other documents 854

48

PAYMENT OF SERVICE TAX


48.2 Constitutional validity of reverse charge provisions 855

48.3 Overview of the scheme of payment of service tax 855

48.4 Service tax payable by the person providing taxable service 856

48.5 Periodicity and due date for payment of service tax 856

48.6 Facility to make service tax payment via electronic route 857

48.6-1 Compulsory e-payment 857

48.6-2 Designated banks for making e-payment 858

48.7 Other modes of payment of service tax 859

48.7-1 Service tax to be mandatorily deposited in designatedbank 860

48.7-2 Date of tender of banking instrument for payment ofservice tax to be specified under GAR-7 860

48.8 Accounting code for payment of service tax 860

48.8-1 Payment of tax under wrong code 860

48.9 Assessee�s code to be mentioned on service tax payment challans 861

48.10 Rounding off of tax, interest, penalty or fine etc. 861

48.11 Payment of service tax in advance 861

PAGE

I-63 CONTENTS

48.12 Provisional payment of service tax 862

48.13 Adjustment of service tax towards service not rendered 862

48.13-1 Adjustment of service tax towards service not rendered 862

48.13-2 Adjustment of excess service tax 863

48.13-3 Adjustment of excess service tax in case of renting ofimmovable property 863

48.14 Service tax collected from any person to be deposited with CentralGovernment 863

48.15 Payment of interest on excess amount of service tax collected 864

48.16 Failure to deposit service tax assessed 865

48.17 Refund of service tax erroneously deposited 865

48.17-1 Payment of interest on delayed refunds 865

Annex 48.1 : Electronic Accounting System in Excise and Service Tax(EASIEST) 866

Annex 48.2 : Implementation of EASIEST and GAR 7 Challan 869

Annex 48.3 : Payment of Service Tax 876

Annex 48.4 : Electronic Payment of Central Excise Duty and Service Taxthrough banks having Internet banking facilities 877

Annex 48.5 : Restoration of service specific accounting codes forpayment of service tax 882

Annex 48.6 : Mention of the assessee code Compulsory on TR-6/GAR-7 890

Annex 48.7 : Rate of interest on delayed refunds 891

49

ACCOUNTS AND RECORDS TO BE MAINTAINEDBY SERVICE PROVIDERS


49.2 Accounts and records to be maintained by service providers 892

49.2-1 Maintenance of computerized accounts and records 892

49.2-2 Period for which the account and records need to bepreserved 893

49.2-3 List of recommended records to be maintained 893

49.3 List of records to be furnished by the service provider 893

49.4 Powers of the officer to access registered premises 894

Annex 49.1 : Maintenance and furnishing of records 895

PAGE

50

SUBMISSION OF SERVICE TAX RETURNS


50.2 Form, frequency and due dates for filing service tax return 896

50.2-1 Enclosures to be filed with service tax return 897

50.3 Modes of filing service tax return 898

50.3-1 Manual filing of service tax return 898

50.3-2 Mandatory e-filing of service tax return in specified cases 898

50.3-3 Filing of service tax return through Service Tax ReturnPreparer 898

50.3-4 Filing of service tax return through registered post 899

50.4 Filing of service tax return by an input service distributor 899

50.5 Revision of service tax return 899

50.6 Consequences of delayed/non-filing of service tax returns 899

Annex 50.1 : Draft format of single Central Excise and service taxreturn 901

Annex 50.2 : Procedure for electronic filing of Central Excise andService Tax returns and for Electronic Payment ofExcise Duty and Service Tax 905

Annex 50.3 : Introduction of remedial measures to mitigate difficultiesfaced by service tax assessees in e-filing of service taxreturns 916

Annex 50.4 : Clarification regarding amendment made by FinanceAct, 2011 918

Annex 50.5 : Salient features of service tax return 919

51

ASSESSMENT, AUDIT AND ADJUDICATION


51.2 Self assessment 920

51.3 Provisional assessment 921

51.4 Best judgment assessment 923

51.5 Scrutiny of service tax return 925

51.6 Special audit 926

51.7 Adjudication by central excise officer 927

51.7-1 Principles of natural justice must be followed 927

CONTENTS I-64

PAGE

51.7-2 Principles of res judicata 927

51.7-3 Powers of adjudication by central excise officers 928

51.7-4 Restriction of the powers of adjudication by the centralexcise officers 928

Annex 51.1 : Provisional assessment under service tax 930

Annex 51.2 : Scrutiny of ST-3 returns 931

Annex 51.3 : Departmental clarification on adjudication of cases 933

52

DEMAND AND RECOVERY OF SERVICE TAX


52.2 Recovery of service tax under section 73 935

52.2-1 Show Cause Notice must be in writing 935

52.2-2 Issuance of statement for the subsequent period 935

52.2-3 Show cause notice must be issued under section 73 ofthe Act 936

52.2-4 DGCEI officer empowered to issue show cause notice 936

52.2-5 Show cause notice must specify the amount of servicetax payable and the basis of service tax payments 936

52.2-6 Period of limitation for service of show cause notice 936

52.2-7 Essential requirements of show cause notice 940

52.2-8 Modes of service of show cause notice 941

52.2-9 Date of service of show cause notice 941

52.2-10 Procedure of adjudication of show cause notice 942

52.3 No show cause notice to be served when service tax along withinterest is paid voluntarily 943

52.3-1 Issue of show cause notice despite voluntarily paymentof service tax 944

52.4 Determination of demand 944

52.5 Recovery of service tax from the person liable to pay the tax 944

52.6 Modes of recovery of service tax 945

52.7 CBEC�s instructions regarding initiation of recovery proceedings 946

52.8 Provisional attachment of property 947

52.9 First charge on the property of the assessee 947

Annex 52.1 : Appointment of officers by CBEC 948

Annex 52.2 : Power of adjudication of Central Excise Officers in casesrelating to Service Tax 951

I-65 CONTENTS

PAGE

Annex 52.3 : Payment of service tax with applicable interest prior toissuance of show cause notice 953

Annex 52.4 : CBEC�s instructions regarding initiation of recoveryproceedings 955

Annex 52.5 : Instructions regarding provisional attachment of propertyunder section 73C of the Finance Act, 1994 957

53

PAYMENT OF INTEREST


53.2 Interest on delayed payment of service tax 960

53.2-1 Rate of interest 960

53.2-2 Computation of period of delay in payment of tax fordetermining interest liability 960

53.2-3 Interest on tax liability arising out of retrospectiveamendment in law 962

53.2-4 Levy of interest is automatic 962

53.2-5 Interest overpaid is refundable 963

53.3 Interest on delay in payment of amount in terms of the provisionscontained under Rule 6(3)(ii) of the CENVAT Credit Rules, 2004 963

53.4 Payment of interest by the department on delayed refunds ofservice tax 963

53.4-1 Payment of interest by the department on delayed refundof pre-deposited tax by the assessee 964

54

PENALTY, PROSECUTION AND COMPOUNDINGOF OFFENCES


54.2 Penalty for failure to pay service tax 966

54.2-1 Quantum of penalty under section 76 966

54.2-2 Key parameters for levy of penalty under section 76 968

54.3 Penalty for delay in submission of returns 969

54.4 Penalty for other offences/non-compliances 969

54.5 Penalty for fraud, suppression, mis-representation etc. - Section 78 971

54.5-1 Essential conditions for levy of penalty under section 78 971

54.5-2 Quantum of penalty under section 78 973

CONTENTS I-66

PAGE

54.5-3 Reduction in the amount of penalty under section 78(1) 973

54.5-4 Impact of subsequent increase/reduction in the servicetax at appellate stage - Section 78(2) 974

54.5-5 Penalties under section 76 and section 78 are mutuallyexclusive 975

54.6 Penalty on officers of the company for specified contraventions -Section 78A 975

54.7 Penalty for contravention with CENVAT Credit Rules, 2004 976

54.8 Waiver of penalty - Section 80 976

54.8-1 Meaning of reasonable cause 977

54.8-2 Special dispensation from penalty in case of renting ofimmovable property - Section 80(2) of the Act 979

54.9 General guidelines for levy of penalty 979

54.9-1 Where the tax with applicable interest is paid before theissue of show cause notice 979

54.9-2 No penalty if tax involved is less than Rs. 1000 979

54.9-3 Penalty is leviable if service tax is collected but notdeposited 980

54.9-4 Burden to prove suppression is on the department 980

54.10 Prosecution provisions 980

54.10-1 Offences for which prosecution proceedings may gettriggered 980

54.10-2 Punishment for offences 981

54.10-3 Previous sanction of Chief Commissioner required 982

54.10-4 Threshold for initiating prosecution proceedings 982

54.10-5 Time limit for initiating prosecution proceedings 982

54.10-6 Prosecution in case of companies 982

54.10-7 Normally prosecution proceedings will be initiated afterdepartmental adjudication 982

54.10-8 Existence of mens rea 982

54.10-9 Cognizable and non-cognizable offences 983

54.10-10 Power to arrest 983

54.11 Compounding of offences 983

54.11-1 Meaning of compounding 983

54.11-2 Full and bona fide disclosure necessary for compoundingof offense 983

54.11-3 Composition order whether appealable 984

54.11-4 Non-compoundable offences 984

54.11-5 Procedure for compounding 985

I-67 CONTENTS

PAGE

CONTENTS I-68

Annex 54.1 : Clarification regarding rationalization of penalty provisionsand re-introduction of procecution provisions under theFinance Act, 1994 988

Annex 54.2 : Clarifications regarding prosecution provsions under theFinance Act, 1994 990

55

SERVICE TAX INVESTIGATIONS(SEARCH AND SEIZURE)


55.2 Access to registered premises [Rule 5A] 993

55.3 Power to search or seize 994

55.4 Essential conditions for initiation of search operation 994

55.4-1 Meaning of �reason to believe� 994

55.4-2 Meaning of �secreted� 995

55.5 Provisions of Code of Criminal Procedure relating to searchapplicable 996

55.5-1 Section 100 of Code of Criminal Procedure, 1973 -�Persons in charge of closed place to allow search� 996

55.5-2 Section 165 of Code of Criminal Procedure, 1973 -�Search by police officer� 998

55.6 No authority to collect any amount during search and seizureoperation 998

Annex 55.1 : Department�s power to access registered premises 999

56

APPEALS AND REVISION


56.2 Appeal to Commissioner of Central Excise (Appeals) 1001

56.2-1 Who can file appeal 1001

56.2-2 Form of appeal and number of copies 1002

56.2-3 Time limit for making the appeal 1002

56.2-4 Orders against which appeal lies before Commissioner(Appeals) 1002

56.2-5 Pre-deposit of disputed demand and stay application 1003

56.2-6 Passing of order by Commissioner (Appeals) 1003

56.3 Appeal to Appellate Tribunal 1004

56.3-1 Orders against which appeal lies before Appellate Tribunal 1004

PAGE

I-69 CONTENTS

56.3-2 Persons eligible to file appeal before Appellate Tribunal 1004

56.3-3 Form of appeal and number of copies 1005

56.3-4 Time limit for making the appeal 1005

56.3-5 Monetary limit for departmental appeals 1006

56.3-6 Prescribed fee for filing of appeal before the AppellateTribunal 1006

56.3-7 Pre-deposit of disputed demand and stay application 1007

56.3-8 Filing of memorandum of cross objections 1007

56.4 Appeal to High Court 1008

56.4-1 Appealable matters 1008

56.4-2 Time limit of filing the appeal 1009

56.4-3 Fee for filing the appeal 1009


56.4-5 Procedure to be followed by High Court 1009

56.5 Appeal to Supreme Court 1009

56.5-1 Appealable matters 1009

56.5-2 Limitation for filing civil appeal/special leave petition 1010


56.6 Revision by Central Government 1010

56.6-1 Orders against which revision can be filed 1010

56.6-2 Time period for filing the application 1011

56.6-3 Persons eligible to file revision application 1011

56.6-4 Fee payable with revision application 1011

56.6-5 Refusal to admit revision application 1011

Annex 56.1 : Monetary limits for filing appeals by Department beforeCESTAT/High Courts and Supreme Court 1012

57

RECTIFICATION OF MISTAKES



57.2-1 Rectification to be made by the officer having jurisdictionon the assessee 1015

57.3 Relevant substantive and procedural aspects of rectificationproceedings 1015

57.3-1 An issue involving legal interpretation is not a mistake 1015

57.3-2 The mistake sought to be rectified must be �apparentfrom the record� 1016

PAGE

CONTENTS I-70

57.3-3 Period of limitation for passing rectification order 1017

57.3-4 Orders against which rectification application lies 1017

57.3-5 Rectification order must be passed in writing 1017

57.4 Powers of the officer conducting rectification proceedings 1018

57.4-1 Manner of initiating rectification proceedings 1018

57.4-2 Central excise officer to follow principles of natural justice 1018

57.4-3 Provisions relating to rectification of mistake cannot beused to reopen the assessment 1018

58

ADVANCE RULING


58.2 Meaning of advance ruling 1019

58.3 The Authority for Advance Ruling 1020

58.3-1 Powers of the AAR 1020

58.4 Relevant substantive and procedural aspects of advance rulingapplications 1021

58.4-1 Persons eligible to apply for advance ruling 1021

58.4-2 Advance ruling can be obtained only in respect of aproposed business activity 1024

58.4-3 Issues on which advance ruling can be obtained 1025

58.4-4 Issues on which advance ruling cannot be obtained 1027

58.4-5 Form of advance ruling application 1027

58.4-6 Fee for advance ruling application 1027

58.4-7 Person authorized to sign advance ruling application 1027

58.4-8 Submission of the application 1028

58.4-9 Withdrawal of advance ruling application 1028

58.4-10 Copy of the application to be sent to the Commissioner 1028

58.4-11 Rejection of advance ruling application 1028

58.4-12 Procedure post acceptance of application 1029

58.5 Advance ruling to be declared as void ab initio 1029

58.6 Binding nature of advance ruling 1030

59

SETTLEMENT OF DISPUTES


59.2 Constitution of Settlement Commission 1031

PAGE

I-71 CONTENTS

59.3 Relevant substantive and procedural aspects of application forsettlement of a case 1032

59.3-1 Application for settlement of case 1032

59.3-2 Application form 1033

59.3-3 Verification and signing of application form 1033

59.3-4 Fee for filing application for settlement 1033

59.3-5 Application once made cannot be withdrawn 1033

59.3-6 Circumstances when the application for settlementcannot be entertained 1033

59.3-7 Procedure for settlement of cases by the SettlementCommission 1034

59.4 Powers of Settlement Commission 1035

59.4-1 Power to order provisional attachment of property 1035

59.4-2 Powers of central excise officer 1035

59.4-3 Power to grant immunity from prosecution, penaltyand fine 1036

59.4-4 Power to remand the case to the Central Excise Officer 1036

59.5 Procedure for provisional attachment of property by order ofSettlement Commission 1036

59.6 Fee for obtaining photocopy of report 1037

PART G

AMNESTY SCHEME, 2013

60

SERVICE TAX VOLUNTARY COMPLIANCEENCOURAGEMENT SCHEME 2013


60.2 Constitutional validity of amnesty schemes 1041

60.3 Framework of VCES 1041

60.4 Key definitions 1042

60.4-1 Declarant 1042

60.4-2 Tax dues 1042

60.4-3 Designated authority 1042

60.4-4 Form 1042

60.5 Registration requirement for person opting VCES Scheme 1042

60.6 Relevant period 1043

PAGE

60.7 Period for which declaration cannot be filed 1043

60.8 Persons who cannot file the declaration 1044

60.8-1 Production of accounts, documents or other evidenceunder the Act 1045

60.9 Procedure for making the declaration 1046

60.9-1 Relevant form and period 1046

60.9-2 Relevant authority for entertaining applicationsunder VCES 1046

60.9-3 Acknowledgement of declaration 1046

60.9-4 Time limit for deposit of tax dues 1046

60.9-5 Manner of payment of tax 1047

60.9-6 Filing of proof of tax payment and issue of dischargecertificate(s) 1047

60.9-7 Payments under VCES non-refundable 1047

60.10 Benefits of opting for VCES 1047

60.11 Implications of making wrong declaration 1048

60.12 Frequently Asked Questions on VCES Scheme, 2013 1048

Annex 60.1 : Declaration to be filed by assessee 1051

Annex 60.2 : Acknowledgement of declaration by excise department 1053

Annex 60.3 : Acknowledgement of discharge of service tax dues 1055

APPENDICES

� Service Tax : Statutory Provisions 1059

� Validation Provisions 1155

� Service Tax Rules, 1994 1163

� CENVAT Credit Rules, 2004 1225

� Point of Taxation Rules, 2011 1279

� Service Tax (Determination of Value) Rules, 2006 1285

� Service Tax (Registration of Special Category of Persons)Rules, 2005 1292

� Service Tax (Advance Rulings) Rules, 2003 1298

� Authority for Advance Rulings (Central Excise, Customs and Service Tax)Procedure Regulations, 2005 1303

� Indirect Tax Ombudsman Guidelines, 2011 1313

� Service Tax (Publication of Names) Rules, 2008 1320

CONTENTS I-72

PAGE

� Service Tax (Provisional Attachment of Property) Rules, 2008 1323

� Service Tax Return Preparer Scheme, 2009 1326

� Service Tax (Settlement of Cases) Rules, 2012 1331

� Service Tax (Compounding of Offences) Rules, 2012 1337

� Place of Provision of Services Rules, 2012 1342

� Chronological compendium of notifications as in force from 1-7-2012 1347

� Chronological compendium of circulars and clarifications as in force on1-7-2012 1445

� Taxation of services : CBEC�s Education Guide 1499

� Service Tax Voluntary Compliance Encouragement Scheme, 2013 1615

� Service Tax Voluntary Compliance Encouragement Rules, 2013 1619

� Departmental clarification on Service Tax Voluntary ComplianceEncouragement Scheme 1626

SUBJECT INDEX 1629

LIST OF NOTIFICATIONS i

LIST OF CIRCULARS/LETTERS/ORDERS/TRADE NOTICES iii

I-73 CONTENTS