Service Tax Definition, Negative List

Do you know that from 01.07.2012, service tax would be applicable on all services except a few? The services in the ‘Negative List’ are excluded from the purview of Service Tax. The following services are part of the negative list:

Negative List –

  1. Services provided by Govt. or Local authority
  2. Services provided by RBI
  3. Services by a Foreign diplomatic mission located in India
  4. Services relating to agriculture or agricultural produce
  5. Trading of Goods
  6. Processes amounting to manufacture or processing of Goods
  7. Selling of space or timeslots for advertisements other than advertisements broadcast by radio or television
  8. Access to a road or a bridge on payment of toll charges
  9. Betting, gambling or lottery
  10. Entry to entertainment events and access to amusement facilities
  11. Transmission or distribution of electricity
  12. Specified services relating to education
  13. Services by way of renting of residential dwelling for use as residence
  14. Financial sector
  15. Services relating to transportation of passengers
  16. Services relating to transportation of goods

Definition of service – For the purpose of Service Tax applicability a service is:

  • Any activity
  • Carried out by a person for another
  • For consideration
  • And includes a declared service

Taxability of service – A service is a Taxable Service if it is

  • Provided or agreed to be provided by a person to another
  • In the taxable territory
  • And should not be specified in the negative list

=========================================================================================

This article is brought to you by onlineITreturn.com

For a detailed advice, you can contact info@onlineitreturn.com or visit www.onlineitreturn.com.  OnlineITreturn.com is an online portal for e filing your income tax return and advise, consultancy on taxation matters including Service Tax.  All taxation matters are handled by Chartered Accountants…

 

Service Tax Export of Services

In most cases, outsourcing or export services are outside the purview of Service Tax as normally the services are provided to a foreign client (located outside India). These services fall within the scope of provisions of service tax for export services subject to some conditions.

As per Rule 6A of Service Tax Rules, 1994, the provision of any service provided or agreed to be provided shall be treated as export of service when, -

(a) The provider of service is located in the taxable territory,

(b) The recipient of the service is located outside India,

(c) The service is not a service specified in the section 66D of the Act (Negative List),

(d) The place of provision of the service is outside India,

(e) The payment for such services has been received by the provider of service in convertible foreign exchange, and

(f) The provider of service and recipient of service are not merely establishments of a distinct person in accordance with item (b) of Explanation 3 of clause (44) of section 65B of the Act.

Section 66C of the Service Tax Act provides for determination of place of provision of service. As per Sec 66C:

(1)    The Central Government may, having regard to the nature and description of various  services, by rules made in this regard, determine the place where such services are provided or deemed to have been provided or agreed to be provided or deemed to have been agreed to be provided.

 (2) Any rule made under sub-section (1) shall not be invalid merely on the ground that either the service provider or the service receiver or both are located at a place being outside the taxable territory.

Rule 3 of PLACE OF PROVISION OF SERVICES RULES, 2012 [28/2012-Service Tax dated 20.06.2012] provides that the place of provision of a service shall be the location of the recipient of service provided that in case the location of the service receiver is not available in the ordinary course of business, the place of provision shall be the location of the provider of service.

It is clear from the above Rule 3 that place of provision of the service is outside India if the location of the recipient of service is outside India.

To summarise the main points, the provision of any service provided shall be treated as export of services when, -

(a) The provider of service is located in the taxable territory (India),

(b) The recipient of the service is located outside India,

(c) The service is not a service specified in the section 66D of the Act (Negative List),

(d) The place of provision of the service is outside India (Location of the recipient in most cases),

(e) The payment for such services has been received by the provider of service in convertible foreign exchange.

Check out our other articles related to Service Tax

https://onlineitreturn.com/blog/2012/11/service-tax-on-directors-remuneration/

__________________________________________________________________________________

About onlineITreturn.com

OnlineITreturn.com is an online portal for efiling your income tax return. We collect your information for income tax return filing over our website www.onlineITreturn.com. Thereafter the information for each individual is reviewed by our team of chartered accountants (CA) who prepares the tax computation. We then efile your income tax return using approved e-intermediaries.