1. PresentsA Knowledge Master ClassOn Understanding New Regime of Service Taxation in IndiaConducted by Dr. Sanjiv Agarwal FCA, FCSWednesday,31thOctober,2012New Delhi Dr. Sanjiv Agarwal1

2. SESSION IIIServices not liable to Service Tax 2 3. This Presentation Covers What is Negative List Sectors in Negative List Analysis of Negative list of Services3 4. Services on which no Service Tax shall be payable comprise of : Service which are specifically excluded from the scope of definition of service itself u/s 65(44). 17 broad services specified in the negative list of services u/s 66D. Services which are exempt from levy of Service Tax under N. No. 25/2012-ST dated 20.06.2012. Specified services otherwise exempt under specific notifications. Activities where service provider and service receiver are in non taxable territory 5. What is negative list Defined in new section 66D Section 66D specifies seventeen 17 broad categories of services. Effective from 1-7-2012 If an activity meets the characteristics of service , it is taxable unless specified in Negative List. Based on socio-economictax criterion5 6. Socio Economic Considerations in Negative listAdministrative considerations: taxation of Government, difficult to tax sectors e.g. margin-based financial services.Under contractual obligations: Specified international bodies and diplomatic missionsWelfare considerations: welfare of vulnerable sections of society, essential education, public health; public transport, services by non-profit entities, religious services, promotion of art, culture and sports.Economic considerations: transport of export goods, services meant for agriculture, animal husbandry and infrastructure development.Explicit activities in the nature of services, which are within the taxing powers of States: betting and lotteries, tolls.6 7. Negative list of services is drawn from seven sectors, viz. services provided by specified person ie, Government social welfare & public utilities financial sector transportation construction & real estate education health care others & miscellaneous7 8. Services by Government or a local authority excluding the followingservices to the extent they are not covered elsewhere: Services by the Department of Posts by way of speed post, express parcel post, life insurance and agency services provided to a person other than Government; Services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; Transport of goods or passengers; or Support services provided to business entitiesto be contd..8 9. Most of services provided by Central / StateGovernments exempt from service tax. But following services are taxable - Department of posts - speed post, express parcel, life insurance and agency service to non government business entity but basic mail, money orders, operation of saving accounts ,pension payment etc services are covered in negative list In relation to vessel or aircraft service within/outside port/airport Transport of goods and/ or passengers Support service to business entities To be contd.. 10. Services by government as sovereign functions (grant oflicensing rights or audit of government, passport etc.) Excludes corporations formed under Central Acts orState Acts or various Government companies registeredunder Companies Act, 1956 or autonomous institutionsset up by a Special Acts Government Department needs to be registered and topay tax on support services of Renting of immovable properties Speed post, express parcel, life insurance. Transport of goods and/ or passengers Services in relation to vessel or aircraft For other services, Government not liable to pay servicetax as tax paid by service recipient in reverses charge (N.No. 30)To be contd.. 11. Support services" means infrastructural, operational, administrative, logistic, marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason whatsoever shall include advertisement and promotion, construction or works contract, renting of immovable property, security, testing and analysis; Services provided by Government Security agencies are covered under support service - under reverse charge, Service Receiver is liable to tax. 12. All services provided by RBI are in Negative List Service Provided to RBI is taxable unlesscovered in negative list. Service provided by banks to RBI taxable unlesscovered in Negative List or exempted services 13. Services by diplomatic mission of any country located inIndia Does not cover services provided by any office orestablishment of an International organization (Section 3of United Nation Privileges & Immunities Act 1947) Example- UNESCO, UNICEF, IMF, IBRD etc. NotificationNo. 27/2012-STdated20.6.2012conditionally exempts service provided by any person for the official use of a provision of a foreign diplomatic mission orconsular post in India for personal use or use of the family member of diplomatic agentsor career consular officers posted in India 14. services relating to agriculture by way of(i) agricultural operations directly related to production of anyagricultural produce including cultivation, harvesting, threshing, plantprotection or seed testing;(ii) supply of farm labour;(iii) processes carried out at an agricultural farm including tending,pruning, cutting, harvesting, drying, cleaning, trimming, sun drying,fumigating, curing, sorting, grading, cooling or bulk packaging andsuch like operations which do not alter the essential characteristics ofagricultural produce but make it only marketable for the primarymarket;(iv)renting or leasing of agro machinery or vacant land with or without astructure incidental to its use;(v) loading, unloading, packing, storage or warehousing of agriculturalproduce;(vi)agricultural extension services;(vii)services by any Agricultural Produce Marketing Committee or Boardor services provided by a commission agent for sale or purchase ofagricultural produce;to be contd 15. The Services relating to agriculture or agricultureproduce specified in negative list- agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or seed testing; supply of farm labour; processes carried out at the agricultural farm including tending, pruning, cutting, harvesting, drying cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter essential characteristics of agricultural produce but makes it only marketable for the primary market not for retail market; (e.g. cleaning of Wheat) to be contd . 16. renting of agro machinery or vacant land with or without astructure incidental to its use (e.g. green house, storageshed.) loading, unloading, packing, storage and warehousing ofagricultural produce; agricultural extension services (application of scientificresearch, farmer education & training) services provided by any Agricultural Produce MarketingCommittee or Board (APMC) for agriculture oragricultural produce but does not include non -agricultural activities (e.g. renting of shops or otherproperty or services provided by commission agent forsale or purchase of agricultural produce) to be contd . 17. Agriculture -Section 65 B(3)Cultivation of plants and rearing of all life-forms ofanimals except the rearing of horses, for food, fiber, fuel,raw material or other similar productsAgriculture Produce -Section 65B(5)any produce of agriculture on which either no furtherprocessing is done or such processing is done as isusually done by a cultivator or producer which does notalter its essential characteristics but makes it marketablefor primary market(E.g. Plantation crops likerubber, tea or coffee but does not include potato chips ortomato ketchup)to be contd . 18. Trading of goods is not a taxable service, it being a saleand not a service. If a transaction is a sale, it is not a service and vice versa Transfer of title in goods is crucial Activities of a commission agent / clearing andforwarding agent who sells goods on behalf of anotherfor a commission are not trading of goods (Title of goodsdoes not pass) Forward contracts are in the nature of trading of goods. Future contracts are not trading of goodsto be contd . 19. Goods - Section 65B(25) goods" means every kind of movable property other than actionable claim and money includes securities, growing crops, grass, andthings attached to or forming part of the landwhich are agreed to be severed before sale orunder the contract of sale 20. process amounting to manufacture or production of goods" means a processon which duties of excise are leviable under section 3 of the Central ExciseAct, 1944 or any process amounting to manufacture of alcoholic liquors forhuman consumption, opium, Indian hemp and other narcotic drugs andnarcotics on which duties of excise are leviable under any State Act for thetime being in force. Covers manufacturing activity carried out on contract or job work basis where Transfer of title of goods is not involved Duties of excise are leviable on such process20 21. excisable goods means goods specified in the FirstSchedule and the Second Schedule to the Central Excise TariffAct, 1985 as being subject to a duty of excise and includes salt Mobility and marketability are essential conditions Goods includes any article, material or substance which iscapable of being bought and sold for a consideration and suchgoods shall be deemed to be marketable. 22. Carrying out an intermediate production process as job work inrelation to -(a) agriculture, printing or textile processing;(b) cut and polished diamonds and gemstones; or plain and studded jewelleryof gold and other precious metals, falling under Chapter 71 of the CentralExcise Tariff Act ,1985 (5 of 1986)(c) any goods on which appropriate duty is payable by the principalmanufacturer or(d) processes of electroplating, zinc plating, anodizing, heat treatment,powder coating, painting including spray painting or auto black, during thecourse of manufacture of parts of cycles or sewing machines upto anaggregate value of taxable service of the specified processes of one hundredand fifty lakh rupees in a financial year subject to the condition that suchaggregate value had not exceeded one hundred and fifty lakh rupees duringthe preceding financial year 23. Selling of space or time slots for advertisements other thanadvertisements broadcast by radio or televisionThis entry in negative list should qualify the following tests involves selling of space (in case of print media) involves selling of time slots ( in case of electronic media) purpose of selling time slots / space to be for advertisements(publicity / sales promotion, awareness etc.) excludes broadcast by radio or television ( i.e. broadcast will betaxable) to be contd . 24. Taxable Non-taxableSaleofspace or time for Sale of space for advertisement inadvertisement to be broadcast on print mediaradio or televisionSale of time slot by a broadcasting Sale of space for advertisement in billorganization boards, public places (includingstadia), buildings, conveyances, cellphones, automated teller machines,internetAerial advertisingPresentation made in person 25. Not covered in Negative ListCovered In Negative ListPrinting & Publishing of yellow pages,Spaces allotted in buses and publicbusiness directory and trade catalogues transport system public transport systemetc.to run display of advertisementAdvertisement services to GovernmentPrivate circulation of magazines / journalsdepartmentsPurchase of time slots from broadcaster Telephone directoriesand sold to advertising agencyPreparing advertisement for display Clubs, associations, professional bodiesduring a movie in theatre etc. members list / directoriesServices provided by advertisementInternaldirectories /businessagencies in relation to preparation ofinformationsadvertisementCommission received by advertisementagencies from broadcasting or publishingcompanies 26. Advertisement" means any form of presentation for promotion of, or bringing awareness about, any event, idea, immovable property, person, service, goods or actionable claim through newspaper, television, radio or any other means but does not include any presentation made in person; Services provided by advertisement agencies relating topreparation / designing etc of advertisements are taxable. Print media includes newspaper and books. 27. Only covers toll charges for access to road and bridge Includes National highways or state highways Toll on other roads not in negative list Collection charges or service charges paid to any tollcollection agency are not covered under negative list Dose not include services used for providing such service 28. Betting or Gambling means putting on stake something of value, particularly money, with consciousness of risk and hope of gain on the outcome of agame or a contest, whose result may be determined by chance or accident, or on thelikelihood of anything occurring or not occurring Betting is a form of wagering contract in which money or moneysworth is made payable by the parties on the result of an uncertainevent, usually a game or sport Gambling means playing game of chance for money or risky actionundertaken with the hope of success Lottery is a game of chance (e.g. lottery, bingo, lotto etc.) which mayinclude online gamesto be contd . 29. Auxiliary services for organizing or promoting betting orgambling events are not covered in negative list State subject covered in list II Actionable claim In Union of India & Others v. Martin Lottery Agencies Ltd(2009) 14 STR 593 (Supreme Court), it was held thatservice tax can not be levied on sale of lottery ticket In Martin Lottery Agencies Ltd. v. Union of India (2007) 8STR 561 (Sikkim), it was held that petitioner was notrendering services in relation to promotion of clients goodsand service tax liability did not arise 30. Entertainment event if it is intended (may notnecessarily provide) to provide any one or more ofthe following to the recipients / viewers / audience recreation pastime fun , or enjoyment to be contd . 31. This could be by way of exhibition of cinematographic film circus concerts sporting events pageants award functions dance performance musical performance theatrical performances drama, ballets or any such event / programme. to be contd . 32. Amusement facility" means a facility where fun recreation is provided by means of rides gaming devices bowling alleys in amusement parks amusement arcades water parks theme parks such other places but does not include a place within such facility whereother services are provided to be contd . 33. Amusement means entertainment, diversion, pastime,sport etc. Theatrical performances need not be performed intheatre Standalone amusement ride in a mall fun or recreationby means of ride covered under amusement excluded Membership of club which provides amusement facilities- excluded Event manager for organizing an entertainment event orentertainment is not covered in this category 34. Provided by ElectricityTransmission orDistribution utility Covers both Transmission Distribution Installation of gensets or similar equipment byprivate contractor for distribution - taxable Charges collected by developer or a housingsociety for distribution of electricity within aresidential complex - taxable but excluded if itacts as a licensed authority 35. Service by way of -i. Pre-school education and education up to higher secondary school or equivalentii. Education as a part of a prescribed curriculum for obtaining a qualification recognized by lawiii. Education as a part of an approved vocational education course Conduct of degree courses by colleges,universities orinstitutions which lead to grantof qualifications recognized by lawto be contd . 36. Approved vocational education course a course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training, offering courses in designated trades as notified under the Apprentices Act, 1961 a Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Employment and Training, Ministry of Labour and Employment, Government of India a course run by an institute affiliated to the National Skill Development Corporation set up by the Government of India to be contd . 37. Education upto higher secondary school or equivalentare in negative list. Services provided to or by an educational institution forAuxiliary educational services and renting of immovableproperty exempted under mega notificationNegative list will not include Private tuitions Education as a part of prescribed curriculum forobtaining qualification recognized by law of a foreigncounty Services provided to educational institutions Placement services to be contd . 38. Education related services not in negative list but exemptfrom tax under Notification No. 25/2012-ST dated20.06.2012 Transportation of students to / from institutions Provision of mid-day meal in schools Admission related services to educational institutes where education services are exempt. Coaching / training in recreational activities of arts, culture or sports. 39. Renting coves all types of arrangements in relation toimmovable property with or without its transfer of possession orcontrol and whether wholly or partly. It would cover / include allowing permitting granting access / entry / occupation use of facility letting leasing licensing, or other similar arrangements (such as right to use, sub-lease, space sharing etc.) to be contd . 40. Renting of certain kinds of property already covered inthe negative list renting of vacant land, with or without a structureincidental to its use, relating to agriculture. renting of residential dwelling for use as residence renting out of any property by Reserve Bank of India renting out of any property by a Government or a localauthority to non-business entityto be contd . 41. Residential dwelling not defined but includes residentialaccommodation Does not include hotel, motel, inn, guest house, camp site,lodge, house boat or other place meant temporary stay Residential dwelling used partly as a residence and partlyfor non residential purpose- treated as bundled service Residential unit independent residential unit with specificfacilities for living, cooking and sanitationto be contd . 42. Services by way of (i) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount; (ii) inter se sale or purchase of foreign currency amongst banks or authorised dealers of foreign exchange or amongst banks and such dealers; to be contd . 43. Transactions in money outside the ambit of service Any activity related to a transaction in money by way ofits use or conversion by cash or by any other mode, fromone form , currency or denomination to another form,currency or denomination would not be treated as atransaction in money if a separate consideration ischarged for such an activity Service tax levied on service charges for transactions inmoney including of charges for making of drafts, letter ofcredits issuance charges, service charges relating toissuance of CDs/ CPs etc Interest rate swaps and foreign exchange swaps areexcluded being securities and hence excludedto be contd . 44. Only interest and discount are in negative list Interest on Money borrowed Debt incurred Deposit Claim / obligation/ similar right Service charge / fee/ commission not covered (e.g. prepayment fee, late fee, cheque bounce charges) interest on credit facility not utilized (commitment charges) not covered Bill discounting only discount covered to be contd . 45. Any charges over and above interest/ discount taxable Purchase/ sale of foreign currency between banks andauthorized dealers under negative list Examples of services in negative list- Fixed deposits or saving deposits or any other such deposits in abank for which return is received by way of interest Providing a loan or over draft facility for in consideration forpayment of interest Mortgages or loans with a collateral security to the extent that theconsideration for advancing such loans or advances arerepresented by way of interest Corporate deposits to the extent that the consideration foradvancing such loans or advances are represented by way ofinterest or discount 46. Services by- a stage carriage; railways in a class other than (i) first class; or (ii) an AC coach; ( now exempt under Notification No 43/2012) metro, monorail or tramway; inland waterways; public transport, other than predominantly for tourism purpose, in a vessel, between places located in India; and metered cabs, radio taxis or auto rickshaws. to be contd . 47. Stage Carriage is defined in section 2(40) of MotorVehicles Act, 1988. It means a motor vehicle constructedor adapted to carry more than six passengers excludingthe driver for hire or reward at separate fares paid by orfor individual passengers, for the whole journey or forstages of the journey National waterways covered in inland waterways Metered cab - any contract carriage on which anautomatic device, of the type and make approved by theState Transport Authority, is fitted which indicates readingof the fare chargeable at any moment and that is chargedaccordingly under the conditions of its permit issuedunder the Motor Vehicles Act, 1988to be contd . 48. Covered under negative list Not Covered under negative listMotor vehicles on hire to state Motor vehicles to state transporttransport undertaking (more taken undertaking12 passengers)Exemption to Transport of No exemption for Tourism,passengers by a contract carriage conducted tours, chartered or hire 49. services provided in relation to transportation ofgoods specified in the negative list by road except the services of (i) a goods transportation agency or (ii) a courier agency by aircraft or vessel from a place outside India up tothe customs station of clearance in India; or by inland waterways (agents covered)to be contd . 50. Services provided by GTA taxable except underseparate exemption available for fruits, vegetables, eggs, milk, food grains or pulses in a goodscarriage; goods where gross amount charged on a consignmenttransported in a single goods carriage does not exceed onethousand five hundred rupees; or goods where gross amount charged for transportation of allsuch goods for a single consignee in the goods carriage doesnot exceed rupees seven hundred fifty. Courier services Express cargo service, angadia taxable to be contd . 51. Nature of service relating to Whether covered in the negativetransportation of Goods list entryBy railways NoBy air within the country or abroad NoBy a vessel in the coastal waters NoBy a vessel on a national waterway YesServices provided by a GTANo 52. Funeral Burial Crematorium Mortuary Transportation of deceased 53. THANK YOUFORYOUR PRECIOUS TIMEAND ATTENTIONDr. Sanjiv Agarwal FCA, FCS, Jaipur asandco@gmail.comsanjivservicetax@gmail.com