Support Services

[Gopalarathnam Muralidharan]

state  cooperative milk federation are being audited by Government Cooperative audit wing.  Milk federations are remitting audit fees to Government.   Whether these payment of audit fees to Govt will amount to Support services and if so liable to pay tax under Reverse charge Mechanisam

G Muralidharan

[dipsang vadhel]

Services provided by the government are covered by section 66D i.e. Negative list of services and accordingly not liable to service tax. However, support services by Government to business entities are not part of negative list and accordingly liable to service tax. Support services are defined by clause 49 of section 65B which read as under:

The "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 and shall include advertisement and promotion, construction or works contract, renting of immovable property, security, testing and analysis.

The support services provided by Government has been brought under tax net to provide level playing field to private players proving similiar services. Hoever, the Suppoer services do not cover services provided in relation to Soverign function of the state or Services provided by government to dischrge statutory obligation casted on the Government under any law in force.

If State Co-operative ilk federation is being audited by Government co-operative audit wing to discharge its statutory obligation casted under any Law in force, Then audit by co-operative wing will not be considered as support service. Therfore, there will not be any Service Tax liability of State co-operative milk federation to pay service Tax under reverse charge mechanism.

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AI Summary

Support services by government: taxable unless they are sovereign or statutory-obligation audits, which avoid reverse-charge tax.
Government services are generally non-taxable under the negative list, but support services-infrastructural, operational, administrative, logistic, marketing or similar outsourced functions-are taxable when supplied to business entities; however, services rendered by government in discharge of sovereign functions or statutory obligations are excluded, so a government cooperative audit conducted to fulfil a statutory duty would not be treated as a taxable support service and would not attract service tax under reverse charge.